Market Wrap
Narratives
The addition of Tesla to the S&P 500 will result in a reduction to EPS, due to Tesla’s high market cap to earnings ratio. TSLA’s price to 2021 earnings is 161.3 thus rippling an index earnings fall of -1.3% to $168.84 per share. Conversely, earnings for the consumer discretionary sector are forecasted to increase 1.1% to $13.33 per share, and there is an anticipated 23.5% increase to $1.72 per share for the automobiles industry. As a consequence of these reductions to earnings, price to 2021 earnings will increase 1.4% to 22.2 for the index, 10.7% to 35.1 for the sector, and 410.3% to 38.7 for the industry - David Aurelio, Refinitiv
Week Ahead
Market activity is set to remain subdued next week, with stock markets in the UK, Australia, New Zealand and Canada closing on December 28th in observance of Boxing Day. Elsewhere, markets in Germany, Italy and Japan are scheduled to close on the last day of the year; while in the UK, France and Spain trading ends early on New Year's Eve.
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Earnings
There are 10,361 ratings on stocks in the S&P 500. With the end of year approaching there are 53.6% are Buy ratings, 39.6% are Hold ratings, and 6.8% are Sell ratings. It is interesting to note that analysts are more optimistic on S&P 500 stocks today compared to the start of the 2020 (before the impact of COVID-19). On December 31, 50.6% of ratings on S&P 500 stocks were "Buy" ratings, compared to 53.6% today. Nine sectors have a higher percentage of Buy ratings today compared to the start of the year, led by the Utilities (to 51% from 42%) and Consumer Staples (to 47% from 39%) sectors. On the other hand, just two sectors have a lower percentage of Buy ratings today compared to the start of the year: Communication Services (to 55% from 60%) and Energy (to 62% from 66%) - FactSet
Metric | This Week | Prior Week | Change | Comments |
---|---|---|---|---|
Forward 12-mo Estimate | 159.01 | 160.17 | -1.1599999999999966 | Almost $2 lower vs last week |
Forward 12-mo PE | 23.3 | 23 | 0.3000000000000007 | Versus the 21.5x at the start of the quarter |
Earnings Yield | 4.29 | 4.34 | -0.04999999999999982 | |
2y Combined Average Growth Rate % | 3 | 4 | -1 | 4% has been the average of the last several months |
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S&P 500 Futures
Bull vs Bear
Bulls will seek to maintain value within TR 3674.50 → 3701.75, and ideally break and close back above 3700. Odds favor a retest of last week's ETH 3724.00 print (+0.78%) at some juncture.
Bears will seek to break and hold below TR 3674.50 → 3701.75 and ideally below 3651.00 on a closing basis. A Secondary Test of 3600 (-2.57%) and WLO 3596.00 would likely require a catalyst given subdued holiday volume.
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Indicators
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