The S&P 500's trailing 12-month P/E ratio is currently just above 15.  In the first half of the bull market rally that began in March 2009, the S&P's P/E ratio rose steadily just inline with the price of the index.  If the price of the index (P) and the P/E ratio are both going higher, it means earnings are either not going up as much as price, are flat, or are going down.  In late 2009, the P/E ratio started to trend downward, dropping from 23 to 15 since last December.  Over the same time period, the index itself is basically flat, so this means earnings have increased.  A chart showing the divergence in price and P/E ratio in the middle of the bull market is shown below.

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Yesterday we highlighted the percentage of companies that have beaten earnings estimates this reporting period.  Below we break down the beat rate by sector.  Four sectors have a higher beat rate than the entire market, while six have a lower beat rate.  The Consumer Discretionary sector has the highest beat rate this earnings season at 80.6%.  Consumer Discretionary is followed closely by Industrials at 79.8%.  Consumer Staples and Technology are both right around 76%.  Energy, Telecom, and Financials are all tied at 60% for the lowest earnings beat rate.  Materials is at 69.4%, and Health Care is at 70.3%.

lt may seem like earnings season has been going on forever now, but we're actually just about a third of the way through.  Through yesterday, 662 US companies had reported earnings since the reporting period began with Alcoa's release on July 12th.  From today through the end of earnings season (Wal-Mart's report date on 8/17), 1,518 companies will report.  Tomorrow and next Thursday will be the biggest earnings days, with 250 and 275 companies reporting, respectively.

Below we highlight the percentage of US companies that have beaten earnings estimates as the days have passed this earnings season.  At the start of last week, the beat rate was 73%, and it has trickled slightly lower to its current level of 71.1%.  This season's beat rate is currently 9 percentage points higher than the average of 62% since 1998.

S&P 500 stocks have been beating earnings estimates at a much higher rate.  Through yesterday, 78.8% of S&P 500 companies had beaten expectations.  Interestingly, the high beat rate for the S&P 500 hasn't translated into better stock performance.  The average one-day change for all stocks on their report days has been +0.55% this season.  For S&P 500 stocks, the average one-day change in reaction to earnings has been -0.34%.

So far this earnings season, 10% of US companies have raised guidance while 2.7% have lowered guidance.  Below is a chart showing the quarterly spread between the percentage of companies raising guidance and lowering guidance.  As shown, the 7.3 percentage point spread so far this quarter is higher than any other quarter since 2001.  There are still a significant amount of companies left to report this season, but for now, guidance numbers have been very strong.

Also worth noting is that this is the fifth straight quarter where positive guidance has outnumbered negative guidance.  The second longest streak (since 2001) of positive guidance spreads was three quarters from Q3 '03 to Q1 '04.

After dropping down to the single digits for awhile, the percentage of stocks in the S&P 500 now trading above their 50-day moving averages is at 72%.  Peak readings during short-term rallies are usually around 85%-90%, so there is still a little bit of room to run before this indicator gets overbought.

Telecom, Utilities, and Materials all have more than 90% of stocks trading above their 50-days.  Consumer Staples, Technology, and Industrials all have stronger readings than the overall S&P 500, while Financials is just inline with it at 72%.  Energy, Consumer Discretionary, and Health Care are lagging behind the S&P based on this breadth measure. 

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The chart below shows the S&P 500 in half-hour intervals since April 15th.  After a sharp rebound off the July 2nd lows, the S&P 500 pulled back nearly 3% in mid-July after running into resistance at its downtrend from the April peak.  After that brief pause, however, strong earnings last week helped to boost the S&P 500 above its downtrend.  The next level of potential resistance now lies just below the 1,130 level, which is where the June rally fizzled as well as the flash crash closing low on May 6th.

Yesterday's 100 point advance in the DJIA was the third straight day in a row where the index posted triple digit advances, over which time the index has rallied 4%.  As shown in the table below, there have been seven prior occurrences where the index posted three straight triple digit advances.  Based on those prior occurrences the Dow has averaged a decline of 0.44% the following day and a decline of 1.17% over the next week.  The index posted gains in three out of seven of the day and week periods.

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