{"id":6985,"date":"2017-06-03T17:50:02","date_gmt":"2017-06-03T17:50:02","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=6985"},"modified":"2017-06-03T17:50:02","modified_gmt":"2017-06-03T17:50:02","slug":"sp-500-earnings-the-10-year-treasury-yield-early-look-at-q2-17-earnings-expectations","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=6985","title":{"rendered":"SP 500 Earnings, the 10-Year Treasury yield, Early Look at Q2 &#8217;17 Earnings Expectations"},"content":{"rendered":"<p>It was somewhat surprising to hear\/read Larry Fink, the BlackRock CEO <a href=\"http:\/\/www.fa-mag.com\/news\/blackrock-ceo-fink-says-q2-earnings-could-disappoint-32971.html\">make a comment on Q2 &#8217;17 earnings<\/a>, although it was unclear whether he was talking Blackrock&#8217;s (BLK) results as a firm, or the economy \/ SP 500 in general. (It looks \/ sounds like he is talking the SP 500 in general.)<\/p>\n<p>My own opinion is Mr. Fink is pretty wrong on SP 500 earnings.<\/p>\n<p>Financials have struggled in Q2 &#8217;17, and unperformed year-to-date, but in my opinion that is already discounted in the prices of a lot of the big-cap Financial names.<\/p>\n<p>John Butters over at Factset notes the reduced pressure on Q2 &#8217;17 SP 500 earnings (fewer estimate cuts), which is <a href=\"https:\/\/fundamentalis.com\/?p=6918\">what this blog has been saying<\/a> since mid-May &#8217;17 (also quoting Factset).<\/p>\n<p><em><strong>Q2 &#8217;17 Expected SP 500 earnings growth\u00a0<\/strong><\/em><\/p>\n<ul>\n<li><em><strong>Cons Disc:<\/strong><\/em> +1% today vs +4.3% as of April 1, &#8217;17<\/li>\n<li><em><strong>Cons Spls:<\/strong><\/em> +3.5% today vs +4.8% as of April 1 &#8217;17<\/li>\n<li><em><strong>Energy:<\/strong><\/em> +707% today vs +869% as of April \u00a01&#8242; 17<\/li>\n<li><em><strong>Financials:<\/strong><\/em> +9.3% today vs +10.5% as of April 1, &#8217;17<\/li>\n<li><em><strong>Hlth Care:<\/strong> <\/em>+2.3% today vs +3.3% as of April 1 &#8217;17<\/li>\n<li><em><strong>Industrials:<\/strong><\/em> +1.7% today vs +1.3% as of April 1 &#8217;17<\/li>\n<li><em><strong>Basic Mat:<\/strong> <\/em>+4.7% today vs +9.9% as of April 1 &#8217;17<\/li>\n<li><em><strong>Real estate:<\/strong> <\/em>+3.3% today vs +3.5% as of April 1 &#8217;17<\/li>\n<li><em><strong>Technology:<\/strong> <\/em>+11% today vs +11.5% as of April 1 &#8217;17<\/li>\n<li><em><strong>Telco:<\/strong> <\/em>+1.3% today vs +5.2% as of April 1 &#8217;17<\/li>\n<li><em><strong>Utilities:<\/strong> <\/em>-3.35 today vs -0.8% as of April 1 &#8217;17<\/li>\n<li><em><strong>SP 500:<\/strong> <\/em>+8.4% today, vs +10.2% as of April 1 &#8217;17<\/li>\n<\/ul>\n<p>Source: Thomson Reuters I\/B\/E\/S &#8220;This Week in Earnings&#8221; June 2 &#8217;17<\/p>\n<p>Note the small downside revisions in Technology and Financials (despite the so-called warnings this week by the Financial sector) and note the upward revision to the Industrial&#8217;s sector. Those 3 sectors are 45% of the SP 500 by market cap.<\/p>\n<p>What I worry about this week is the Comey testimony which I believe is set for Thursday, June 8th. There are articles on the political blogs that state the Trump Administration is already trying to thwart former AG Comey&#8217;s testimony, which will not look good. The new Deputy AG (Rosenstein ?) is also expected to testify &#8211; that may prove more revealing.<\/p>\n<p>Through 5 month of 2017, the SP 500 is up about 8.5% &#8211; 9% year-to-date.<\/p>\n<p>The 10-year Treasury yield is at a critical level:<\/p>\n<figure id=\"attachment_6990\" aria-describedby=\"caption-attachment-6990\" style=\"width: 300px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/fundamentalis.com\/?attachment_id=6990\" rel=\"attachment wp-att-6990\"><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-6990\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/10yearwklyTsyyieldchart6317-300x169.png\" alt=\"\" width=\"300\" height=\"169\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/10yearwklyTsyyieldchart6317-300x169.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/10yearwklyTsyyieldchart6317-768x432.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/10yearwklyTsyyieldchart6317-1024x576.png 1024w, https:\/\/fundamentalis.com\/wp-content\/uploads\/10yearwklyTsyyieldchart6317.png 1920w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><figcaption id=\"caption-attachment-6990\" class=\"wp-caption-text\">Click to enlarge<\/figcaption><\/figure>\n<p>&nbsp;<\/p>\n<p>Note how the 10-year Treasury yield is sitting right on its uptrend line off the post-Brexit low.<\/p>\n<p>What happens to the 1-year yield matters to Financial&#8217;s too. My friend Jeff Miller over at &#8220;A Dash of Insight&#8221; and a very good blogger in his own right notes there is no inflation in the US economy and he is very right.<\/p>\n<p>Here is a good article from Wall Street Journal&#8217;s RealTime Economics on the<a href=\"https:\/\/blogs.wsj.com\/economics\/2017\/05\/19\/how-cell-phone-plans-with-unlimited-data-limited-inflation\"> impact of &#8220;unlimited data plans&#8221; on the CPI<\/a>. You don&#8217;t have to wonder why the telecom sector is struggling these days.<\/p>\n<p><strong>Thomson Reuters data (by the numbers):\u00a0<\/strong><\/p>\n<ul>\n<li><em><strong>Fwd 4-qtr est:<\/strong><\/em> $134.83<\/li>\n<li><em><strong>P.E ratio:<\/strong><\/em> 18(x)<\/li>\n<li><em><strong>PEG ratio:<\/strong><\/em> 1.93(x)<\/li>\n<li><em><strong>SP 500 earnings yield:<\/strong><\/em> 5.53%<\/li>\n<li><em><strong>Year-over-yr growth of fwd estimate:<\/strong><\/em> +9.36% vs last week&#8217;s 9.45%<\/li>\n<\/ul>\n<p>Summary\/conclusion: SP 500 earnings are in good shape, with large-cap growth leading the charge this year with returns in the 20% range, versus small-cap value which is negative on the year. It would be helpful to see the 10-year Treasury rise in yield in June and then through the rest of the summer.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>It was somewhat surprising to hear\/read Larry Fink, the BlackRock CEO make a comment on Q2 &#8217;17 earnings, although it&hellip;<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[190,155,91],"tags":[],"class_list":["post-6985","post","type-post","status-publish","format-standard","hentry","category-10-year-treasury-yield","category-treasuries","category-weekly-earnings-update"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6985","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6985"}],"version-history":[{"count":9,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6985\/revisions"}],"predecessor-version":[{"id":6995,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6985\/revisions\/6995"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6985"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6985"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6985"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}