Stock Market & Economy Recap - Sunday, April 25

The earnings per share (EPS) for all S&P 500 companies combined increased +0.52% this week to $185.01. The forward EPS is now +16.34% year to date.

About 25% of S&P 500 companies have now reported Q1 results. 85.4% of those companies have beaten earnings estimates, and combined earnings have come in +22.9% above expectations. (I/B/E/S data from Refinitiv)

The S&P 500 index declined -0.13% this week.

The increase in the EPS (+0.52%) plus the decrease in price (-0.13%) for the week, pushed the price to earnings (PE) ratio down slightly to 22.6x

The earnings yield for the S&P 500 is 4.43% compared to the 10 year treasury rate of 1.56%. Just in terms of valuation, fixed income still offers little competition to stocks.

Economic data review

The Conference Board’s Leading Economic Indicators index (LEI) increased +1.3% in March (the highest monthly growth rate since August), while February’s number was revised lower from 110.5 to 110.2. All ten indicators within the index increased in March.

“The improvement in the U.S. LEI, with all ten components contributing positively, suggests economic momentum is increasing in the near term. The widespread gains among the leading indicators are supported by an accelerating vaccination campaign, gradual lifting of mobility restrictions, as well as current and expected fiscal stimulus. The recent trend in the U.S. LEI is consistent with the economy picking up in the coming months, and The Conference Board now projects year-over-year growth could reach 6.0 percent in 2021.”

The LEI is now about 0.50% away from making a new all time high.

March new home sales came in at 1,021,000, a gain of +20.7% for the month. Gains were pretty solid across all regions and February numbers were revised higher, from 775K to 896K. You have to go back to August 2006 to find a higher monthly number. New home sales have historically been a pretty reliable leading indicator, so a new cycle high for this expansion bodes well.

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