US markets recap: Key ideas for the week of December 2 (Part 1 of 3)
Stocks up despite poor data
The S&P500 (SPY) closed Friday up 0.11% on a shortened holiday week that nonetheless contained some significant economic data. Monday saw pending home sales fall 0.6% month-over-month versus an expected 1.3% gain. This is the fifth month in a row home sales are down. It’s difficult to feel very positive about the trend here, although homebuilder stocks (XHB) shook it off to finish the week up 1.8%.
Tuesday’s consumer confidence print of 70.4 missed expectations of 72.9. Much has been said about the risk that retailers face of a poor showing during the holiday sales season, though like homebuilders, retailers (XRT) shook off the poor data to climb 1.13%. Wednesday’s durable goods orders also missed expectations slightly, printing at -2.0%. Again, not much market reaction here, although expectations were for a -1.9% reading.
The lack of market movement from these prints seems to lend more support to the thesis that the market is fixated on the Fed.
Sell-side expectations unchanged, valuations up slightly
Consensus earnings for the next four quarters were unchanged at $116, for a forward P/E multiple of 15.5—the highest of the year. Forward P/E at this point a year ago was 12.8, and the lowest point in the last year came on January 1, at 12.7. There’s been a lot said about whether stocks are overvalued at these levels. The strength of that argument depends on whether you use forward, trailing, or cyclically adjusted earnings.
Read on to find out about relative performance last week between size, styles, and sectors.
Browse this series on Market Realist:
- Part 2 - Why do utilities still lag while high beta sectors outperform?
- Part 3 - Why payrolls are a potential catalyst on the week