Stock Market & Economy Recap - Sunday, May 23

The earnings per share (EPS) for all S&P 500 companies combined increased to $190.50 this week. This is a gain of +0.20% for the week, and +19.8% year-to-date. 95% of S&P 500 companies have now reported Q1 results. 87% of companies have beaten earnings estimates, and earnings have come in at a combined +22.8% above expectations.

The S&P 500 index declined -0.43% for the week.

Due to the increase in EPS along with the decrease in price, valuation got a little more attractive. The price to earnings (PE) ratio decreased to 21.8.

The S&P 500 earnings yield is now at 4.58%, compared to the 10-year treasury rate of 1.63%.

Economic Data Review

The Conference Board’s Leading Economic Index (LEI) increased a better-than-expected +1.6% in April. The LEI has now made a new all-time high, fully recovering from the COVID-19 recession. According to the report:

“While employment and production have not recovered to their pre-pandemic levels yet, the U.S. LEI suggests the economy’s upward trend should continue and growth may even accelerate in the near-term.”

2021 real GDP estimates now stand at +6.4%. 8 of the 10 index components increased in April, led by the decline in weekly unemployment claims, S&P 500 prices, and the ISM new orders index.

The LEI has now increased +14.7% over the last 12 months, which is the highest annualized growth rate since my data set began in 1999.

Notable Earnings

Home Depot (HD) reported Q1 adjusted EPS which came in +25% above expectations, and growth of +86% over Q1 2020 results.

Quarterly revenue came in +8% above expectations, a growth rate of +32.7% over Q1 2020 results. There is no doubt the home improvement giant has benefited from the stay-at-home orders, and the trend seems to be picking up steam as the company continues to report record revenue growth rates.

Over the last four quarters, quarter revenue growth rates have come in at +23.4%, +23.2%, +25.1%, respectively, and now +32.7%. Prior to this, the average revenue growth rate was around 6%.

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Note: I/B/E/S data from Refinitiv.

Disclaimer: None.

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