The forward 4-quarter earnings estimate for the S&P 500 took a hit this past week, dropping to $114.01 from last week’s $115.04, according to the ThomsonReuters “This Week in Earnings” data, which is a harsher than normal decline.
The P/E ratio on the forward estimate is now 13.9(x), while the earnings yield for the S&P 500 is currently 7.21%.
The year-over-year growth of the forward estimate has now slowed to 3.75%, so the yellow light in terms of the slowing growth of the forward estimate is now blinking yellow, and has slowed more than we thought it would.
The S&P 500 rose 1.74% this past week, led by Homebuilders +6%, Metals and Mining +3%, Financials +2.5% and Industrials +2.10%.
Consumer Staples fell 0.29%, after their scorching hot run, and Healthcare also slid -0.15%, as these two sectors look very extended.
If there is one theme that seems prevalent through three weeks of earnings season, it is to sell what has been strong into earnings, and buy what has been weak. Note the action in Caterpillar (CAT) , Freeport (FCX), Intel (INTC) and Microsoft (MSFT), versus such Consumer Staples as Procter & Gamble (PG), Large-cap Pharma, Amgen (AMGN) and other previous leaders. (Long all – added some PG, and CAT this week, post earnings.)
Stat of the week:
Per Bespoke’s data, here is the % of each sector’s stocks selling above their respective 50-day moving average as of Thursday night, along with the sector’s P/E ratio:
- Consumer Discretionary: 88%, 19.7(x)
- Consumer Staples: 93%, 18.4(x)
- Energy: 35%, 12.5(x)
- Financials: 81%, 13.5(x)
- HealthCare: 75% 16(x)
- Industrials: 52%, 15(x)
- Materials: 53% 16.8(x)
- Technology: 56% 15(x)
- Utilities: 100%, 17.5(x)
- Telco: 100%, 22(x)
Food for thought.
Jeff Miller