SP 500 Earnings Update & Economic Data Review

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The earnings per share for all S&P 500 companies combined increased to $171.33 last week.

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The forward EPS has increased 8% in the last 4 weeks, and 2021 EPS estimates are now 5.3% above 2019.

Q4 earnings reports continue to be stellar compared to expectations. As of Friday, about 37% of the S&P 500 has reported Q4 results. 84% of those companies have beaten expectations, coming in a combined 17.3% above expectations. (I/B/E/S data from Refinitiv)

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The S&P 500 declined -3.31% last week.

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A combination of increased earnings and a decline in price, pushes the price to earnings (PE) ratio down to 21.7x.

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The earnings yield on the S&P 500 improved to 4.61%, while the 10 year treasury rate increased to 1.093%.

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The earnings yield increased more than the 10 year treasury bond rate, pushing the equity risk premium (earnings yield minus risk free rate) up to 3.52%.

Economic data review

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January Consumer Confidence came in at 89.3, +2.5% above the December’s downwardly revised 87.1. Unfortunately, consumer confidence remains near the pandemic lows and sharply lower than the February 2020 high point of 132.6.

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This months reading is down -31.5% from last year.

With weekly unemployment and continued claims worse than they were during the 2008 financial crisis, this shouldn’t come as a surprise. Interestingly, consumer expectations for future conditions improved, per the CB report, “The percentage of consumers expecting business conditions will improve over the next six months increased from 29.5 percent to 33.7 percent, while those expecting business conditions will worsen decreased from 22.0 percent to 18.1 percent. The proportion expecting more jobs in the months ahead increased from 28.0 percent to 31.3 percent, while those anticipating fewer jobs decreased from 22.2 percent to 21.4 percent.”

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