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Graph – Look. This Could Become Big.
Last week was a mixed one in the markets. The Fed’s monetary policy is still providing fertile ground for the market even in the face of weakening earnings beat rates (more below). Despite last month’s government shutdown, a much better than forecast October payroll number was just enough to push the Dow to a new record on Friday. Sweet. But, there is something even more important in the news…come see what it is!
It is gasoline prices and they have had a 100 day decline of 12%. According to Bespoke Investment Group (thanks for the graphic and the facts), the Standard and Poor’s 500 index (S&P 500) average six months performance post a 10% drop in gasoline is 11.5%.
Not bad. Especially after every market below has had a year-to-date return of over 20%.
Sectors
We thought we would bring our readers up to speed on how the S&P 500 sectors have been doing. For the year, the S&P 500 is up just a little over 24%. That is a lot, but take a look at the graph below from StockCharts.com and see that the top three sectors are all up over 30% with Health Care and Consumer Cyclicals up right about 35% (rounded).
Earnings Season
The percentage of companies beating their revenue estimate for the third quarter of 2013 currently sits at 53% (vs. 52.6% last week), which is a move in the right direction but still lower than the average of 60% since 2001. The percentage of companies beating their earnings estimates stands at 59.3% (vs. 61.5% last week), which again is in the wrong direction and is now lower than the final reading of 62.2 from the second quarter. With the exception of a quarterly setback in the first quarter of 2013, we have seen a nice steady quarter-over-quarter increase in earnings since the second quarter of 2012 so we hope this picks back up.
Below is a chart from Bespoke Investment Group that shows that the “beat rate” (referenced above) has been tanking since the end of October as more and more companies report. It is not encouraging when more and more companies report and the news gets gloomier.
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Investment advice offered through Monument Advisory Group, LLC a Registered Investment Advisor (RIA).
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index. The Russell 2000 is an unmanaged index generally comprised of companies with lower price-to-book ratios and lower forecasted growth values. The 2, 10 and 30 year Treasury is simply the yield at the close of the day.
(1) West Texas Intermediate crude spot price is as of end of week.
(2) London Bullion Market Association; gold fixing pricing at 3 p.m. London time.
David B. Armstrong, CFA
President & Co-Founder
Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....
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