Stock Market & Economy Recap - Saturday, May 15

The earnings per share (EPS) for all S&P 500 companies combined increased to $190.12 this week, which is an increase of +0.08% for the week and +19.6% year-to-date. 91.4% of S&P 500 companies have now reported Q1 results, and 87% have beaten estimates by a combined 22.9% above expectations.

The S&P 500 index declined 1.39% for the week.

The Price to Earnings (PE) ratio is now 22x.

The S&P 500 earnings yield is now 4.56% compared to the 10-year treasury rate of 1.63%. Although valuation is not a timing tool, stocks remain reasonably priced compared to fixed income alternatives.

Economic Data Review

The NFIB Small Business optimism index for April came in at 99.8, a gain of 1.6% for the month and +9.8% over the last 12 months. The index began reporting monthly data in January of 1986, and the historical average is now 98.4. 8 of 10 index components came in higher than the prior month, but there are some disappointing trends underneath the surface. According to the report:

  1. “Small business owners are seeing a growth in sales, but are stunted by not having enough workers. Finding qualified employees remains the biggest challenge for small businesses and is slowing economic growth. Owners are raising compensation, offering bonuses and benefits to attract the right employees. 42% of owners reported job openings that could not be filled, a record high reading. Owners continue to have difficulty finding qualified workers to fill jobs as they compete with increased unemployment benefits and the pandemic keeping some workers out of the labor force.”
  2. “Owners are raising selling prices in frequencies not seen since the late 1970's and early 1980's, a period of our highest inflation rates in modern history. Inflation was running at double-digit rates and interest rates reflected the expected inflation. The 10-Year Treasury bond carried a 15% coupon. Today, it is at 1.5% and inflation is very low. This can change very quickly. We don’t have inflation until it shows up on Main Street, but it is beginning to do so.”
  3. The percent of owners expecting better business conditions over the next six months fell seven points to a net negative 15%, surprisingly glum.
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Note: I/B/E/S data from Refinitiv.

Disclaimer: None.

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