Which Sectors Have the Highest Valued Stocks?

Yesterday we did a report for clients which compared the current valuation of the S&P 500 to its historical levels.  With that in mind, today we looked at the valuation of individual stocks to see how they compared to the P/E ratio of the S&P 500.  Currently, 63.6% of the stocks in the S&P 500 have a higher P/E ratio than the index itself.  Given the fact that the index is market cap weighted, this indicates that the largest companies in the index have lower P/E ratios than the smaller companies in the index.

Looking at individual sectors, 87.5% of the stocks in the Telecom Services sector currently have P/E ratios that are above the P/E ratio of the index itself.  Given the fact that there are only eight stocks in this sector, that means that only one stock (MetroPCS: PCS) in the sector trades at a cheaper valuation than the S&P 500.  Other sectors that have a high percentage of above market P/E ratios include Consumer Discretionary, Utilities, and Technology. 

On the other end of the spectrum, Energy is the only sector where more than half of the stocks (55.5%) in the sector have below market P/E ratios.   

At What Level Would You Buy Facebook (FB)?

It has already been called the worst IPO of all time, but the lower Facebook (FB) goes, the more attractive it will become.  We want to get a sense of where Facebook (FB) has to trade in order for Bespoke readers to get interested.  So tell us, at what point would you buy shares of Facebook (FB)?

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Sector Relative Strength

The charts below highlight the relative strength of various sectors versus the S&P 500.  These charts are updated for Bespoke Premium clients on a weekly basis as part of our Sector Snapshots report.  For each chart, a rising line indicates that the sector is outperforming the S&P 500, while a falling line indicates the sector is underperforming the overall market.

Regarding each of the individual sectors, there are some interesting trends worth pointing out.  For starters, although many retail stocks have been hit hard on earnings, the Consumer Discretionary sector has been holding up well and remains right near its highs for the year relative to the S&P 500.  Not surprisingly, while Consumer Discretionary stocks are holding up well, the Energy sector has been getting crushed.  Although the sector has seen a bounce over the last two days, it has a long way to go before getting back to even versus the market.

From late 2011 through late April of this year, the Financial sector saw a big rebound in its relative strength.  Since the start of May, however, the sector has taken a downward turn, which was only exacerbated by the JP Morgan (JPM) trading loss earlier this month.  

The Industrials sector has been a big underperformer over the last twelve months, but after a bounce in the last few days, the sector's relative strength is attempting to make a higher low.  Within the Industrials sector, the Transportation sector has also seen an improvement in its relative strength.  That sector's peak relative performance occurred earlier this year, and the market eventually followed suit.  With that in mind, bulls are hoping the recent improvement in the relative strength of the Transportation sector is a precursor of an improvement in the overall market in the months to come.

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Longest Streaks Without Two Up Days in a Row

The S&P 500 has not seen two up days in a row since April 27th.  The current 16 trading day streak without two consecutive up days is the longest streak since May 2010 when the S&P 500 went 23 straight trading days without two up days in a row.  The chart below shows the S&P 500 going back to 2000.  In the chart, each red dot represents a streak of more than 15 trading days where the index went without two straight positive days.  Next to each dot, we have also labeled how long each streak lasted.  Since 2000, there have now been fourteen streaks of more than 15 trading days, and while the current period has seemed like torture, half of the streaks highlighted lasted at least 20 trading days.

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10-Year Yield is Less than Half of All S&P 500 Stocks

With the 10-Year US Treasury now yielding 1.74%, it is now paying a coupon that is less than the dividend yield of more than half of the stocks in the S&P 500.  As of today's close, there are now 271 stocks in the S&P 500 that have a greater yield than the 10-Year US Treasury.  Of the remaining 229 stocks in the index, 126 have a dividend yield that is less than the 10-Year US Treasury, while 103 pay no dividend at all.

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Russell 1000 Stocks With the Longest Losing Streaks

In today's 1.7% rally for the Russell 1000, only 61 stocks in the index finished the day in negative territory.  Of those 61 names, there were seven stocks in the index that extended their losing streaks to at least seven days.  If these stocks couldn't rally on a day like today, what is it going to take?

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S&P 500 Valuation Checkup

With first quarter earnings season practically over, we wanted to provide an update of the market’s overall valuation and see where it stands from a historical perspective.  Although the S&P 500 is up this year, the trailing P/E ratio for the index has actually declined slightly from where it stood at the end of 2011 (13.28 vs. 13.29).  This continues a trend of P/E contraction we saw in 2011 where earnings grew at a double digit rate, yet stocks were flat.

Earlier today, we sent out a report to Bespoke Premium clients providing a valuation checkup using a variety of indicators.  Clients that wish to view this report can click on the link below.  If you are not yet a client and wish to join, sign up today!

S&P 500 Valuation Checkup

More Bulls Than Bears

Each Friday after the close, we ask Bespoke readers whether they think the S&P 500 will be higher or lower from its current level one month from now.  Even with the market down every day last week, there were more bulls than bears in our over the weekend.  As shown below, of the 520 respondents, 51% said higher while 49% said lower.  This is the first time there have been more bulls than bears in our survey since March 26th.  

Nasdaq 0-5 Last Week

As if last week's Facebook (FB) debacle wasn't enough for the Nasdaq, it was also the first time since July 2010 that the index traded down for five straight days.  Going back to 2000, last week's five day decline was only the thirteenth time that the index was down every day of a full week.  Looking ahead, the index has averaged a gain of 1.10% in the following week with positive returns half of the time.

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This Market Needs a 'Like' Button

Each Friday, members of our Bespoke subscription services receive our Week in Review newsletter.  This report provides Bespoke's current market thoughts through commentary and the unique graphs and charts that our clients have come to love.  If you're looking to get a better grasp of the market, subscribe to one of our membership packages today and download our Week in Review newsletter.

In this week's newsletter:

• Facebook (FB) is Larger Then...
• This is the Worst May Since...
• United States vs. the Rest of the World.
• Average Hourly Returns of the Market
• Technology Sector Losing Streaks.
• Economic Scorecard: How's the US Doing?
• Impact of Lower Commodity Prices.
• Earnings Season: It Got Worse.
• Election Year Script.
• Sentiment Checkup.
• S&P 500 Valuations at Start of Bear Markets.
• Extremely Oversold A/D Line.

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Earnings Day Gains Wiped Out and Then Some

Over at Bespoke Premium, we have just published our multi-page earnings season wrap-up report.  In the report we highlighted that the average stock declined 0.47% on its report day this past earnings season, which is a pretty negative reading.  Even more depressing is how poorly stocks have done since they reported.  The average stock is now down 8.07% since the close on its report day.  And it's not like just the companies that had bad reports have gone down.  Even the companies that had the best reports have cratered.

Below is a list of the 42 S&P 500 stocks that went up more than 5% on their report days this season.  For each stock, we also show how it has done since its close following its 5%+ move.  As shown, the average stock that gained more than 5% on its report day has averaged a decline of 10% since then!  So all of the good news has been completely wiped out and then some.  

Apple is a prime example.  The company reported blowout numbers above and beyond all expectations and then rallied 8.87% on the day.  But since that day, it is down 13.05%.

XLNX is another example.  On April 26th, the stock went up 6.77% after it beat earnings estimates, beat revenue estimates and raised guidance.  The stock hasn't had an up day since!  XLNX is currently down 16 days in a row for a decline of 14.57%, which is the worst losing streak in the Russell 1,000.

From Whole Foods to Intuitive Surgical to Harley Davidson to Boeing, big name companies that had very positive earnings reports have given up all of their post earnings gains and then some.  Talk about ugly.

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S&P 500 Higher or Lower From Here?

Another day, another down market.  May has been ugly so far, and that's an understatement.  The Dow has been down 12 of the last 13 trading days, and it has only been up twice so far this month.  Even Europe has had four up days this month.  So where do we go from here?   Please take part in our poll below which asks whether the S&P 500 will be higher or lower than its current level one month from now.  We'll report back with the results on Monday before the open.  

Will the S&P 500 be higher or lower than its current level one month from now?
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First Quarter Earnings Season Final Stats

Earnings season looked like it might be a memorable earnings season early on, but it ended up being one to forget.  On the following pages we take a look at final first quarter earnings season stats.  

In the first chart below, we highlight the percentage of companies that ended up beating earnings estimates.  Of the 2,257 companies that reported...

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Out of the Gate at $42.05

Shares of Facebook (FB) came out of the gate today at a price of $42.05, making it the 22nd most valuable company in the United States.  At that price, FB is bigger than PEP, AMZN, and MCD but still smaller than KO, JPM, and MRK.

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Dow 12,000 or 13,000? Which Comes First?

Earlier today when the Dow was trading at 12,500 (it's now at 12,442), we asked Bespoke readers which level they thought the index would reach first -- 12,000 or 13,000.  As shown below, bears were in the majority, but by a very small margin.  As shown below, 52% of respondents said the Dow would first hit 12,000, while 48% said it would rally and hit 13,000.  Interpret this how you will, but at least based on our readership, sentiment at current levels is pretty much split.

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