Stock Market & Economy Recap - Saturday, May 8

The earnings per share (EPS) for all S&P 500 companies combined increased to $189.96 this week, which is a gain of +1.3% for the week, and +19.5% year-to-date.

88% of S&P 500 companies have now reported Q1 results. 87.2% have beaten earnings estimates and results have come in +22.8% above expectations. 2021 earnings growth is now +34% and rising.

The S&P 500 gained +1.23% for the week; another record high.

The EPS increased (+1.3%) slightly more than the index (+1.23%). The price to earnings (PE) ratio remains at 22.3x.

The S&P 500 earnings yield is 4.5%, and when compared to the 10-Year Treasury rate (which declined to 1.57%), it still heavily favors stocks in terms of valuation even at these record high prices. However, valuation isn’t a market timing tool. It’s just one piece of the puzzle.

Economic Data Review

The Institute of Supply Management (ISM) reported economic activity in the manufacturing sector grew for the eleventh straight month. April results came in at 60.7, which was below last month (64.7), but this still remains at historically high levels and well in expansion territory (reading above 50 signals expansion). According to the report:

“The manufacturing economy continued expansion in April. Survey Committee Members reported that their companies and suppliers continue to struggle to meet increasing rates of demand due to coronavirus (COVID-19) impacts limiting availability of parts and materials.

"Recent record-long lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are continuing to affect all segments of the manufacturing economy. Worker absenteeism, short-term shutdowns due to part shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential.”

All 18 manufacturing industries reported growth in April. New orders, Production, and Employment continue growing, while 80% of respondents reported having to pay higher prices for materials, pushing the prices index to a 12+ year high.

The ISM Services sector index for April came in at 62.7, slightly below March (63.7), but still well in expansion territory. 17 out 18 services industries reported growth in April. According to the report:

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Note: I/B/E/S data from Refinitiv.

Disclaimer: None.

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