Stock Market & Economy Recap - Saturday, Nov. 27

S&P 500 Earnings Update

S&P 500 earnings per share (EPS) increased to $216.03 this week. The forward EPS is now +36% year-to-date. 97% of S&P 500 companies have now reported Q3 earnings. 81% have beaten estimates, and results have come in a combined 10.2% above expectations. The Q3 earnings growth rate is now +42.4%.

The S&P 500 price to earnings (PE) ratio dropped to 21.3 this week as a result of the increase in EPS and the drop in the price of the index.

The S&P 500 earnings yield is now 4.7%, remaining well above the 10-year Treasury bond rate, which declined to 1.49% this week.

Economic Data Review

Existing homes sales for October came in above expectations at 6.34 million units, which was an increase of +0.8% over last month but down -5.8% from this time last year, as supply constraints fail to keep up with demand. The monthly gains were led by the Midwest (+4.2%) while the Northeast actually experienced a decline of 2.6%, the South was up 0.4%, and the West was unchanged.

The median sales price for existing homes is now $353,900, which is +13.1% over the last 12 months. Price increases over the last 12 months were led by the South (+16.1%), Midwest (+7.8%), West (+7.7%), and Northeast (+6.4%). Unsold inventory is now at a 2.4-month supply, still well below the six-month supply level typically associated with a balanced market.

M2 money supply increased at an annualized rate of 13% in October, up from 12.9% last month and still well above the long-term average of 6-7%. There is little hope of reigning in the inflation threat until this number reverts back below the historical average without raising the short-term Fed Funds rate, which probably isn’t going to happen until summer 2022 at the earliest.

The second estimate of Q3 real Gross Domestic Product (GDP) came in at +2.1%, slightly better than the first estimate (+2.0%). Real GDP is now +1.4% above the pre-COVID-19 peak.

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I/B/E/S data is from Refinitiv.

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