Down goes the Dow

Here is an excerpt from an online article that gets to what I"m talking about in my post above.

http://www.marketwatch.com/story/by-this-measure-investors-might-be-really-overpaying-for-stocks-2016-04-22


According to FactSet, the 12-month forward PE for the S&P 500 SPX, -0.20% stands at 16.8, while trailing PE is 18.4. Both numbers are above their 5-year and 10-year averages. The consensus Street view on valuations is that stocks are neither cheap nor expensive, with current levels justified given low interest rates and low inflation.

But both of those PE measurements are calculated using what are known as blended earnings, which can make the ratios look lower than they would otherwise. Blended earnings rely on a combination of earnings calculations, which for some components conform to GAAP, or generally accepted accounting principles, and for others consist of adjusted earnings, which are adjusted to exclude one-time charges.

The difference between adjusted (non-GAAP) and reported earnings (GAAP) in 2015 rose to the highest level since the financial crisis, according to S&P Dow Jones Indices.

The PE for the S&P 500, using “as reported†or “pure GAAP†12-month trailing earnings is currently at 23.75, its highest since 2009, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

U.S. stocks were facing another choppy session on Wednesday, with investors carefully staying on the sidelines ahead of the jobs report later in the week, which could weaken or strengthen the case for a Federal Reserve interest rate hike in September.

Data on private employment out in the morning, as well as comments from a trio of Fed speakers, will also be closely watched for any rate hints.

Futures for the Dow Jones Industrial Average slipped 5 points to 18,439, while those for the S&P 500 index rose 0.05 point to 2,175.25. Futures for the Nasdaq-100 index fell 0.25 point to 4,775.75.

The muted action comes after similar small moves on Tuesday, when investors weighed comments from Fed Vice Chairman Stanley Fischer about the timing of the next policy move. The S&P 500 closed down 0.2%, while the Dow average ended off 0.3%.

"While markets start to obsess again about Friday's jobs report, given Fed vice chair Stanley Fischer's comments yesterday, today's ADP employment report will once again be looked at as a bellwether for this number," said Michael Hewson, chief market analyst at CMC Markets, in a note.

"[That's] despite the fact that there has been no correlation at all between the two reports in the last three months. While the ADP report has been broadly steady between 175k and 181k, between May and July, the Friday NFP report has been all over the map," he added.

Economic news: The ADP report is due at 8:15 a.m. Eastern Time and forecast to show the private sector added 171,500 people to payrolls in August, according to FactSet.

The data have arguably worked as a precursor for the more closely watched nonfarm-payrolls report out on Friday.

Also due Wednesday are the Chicago purchasing managers index for August, out at 9:45 a.m. Eastern Time, and a reading on pending homes sales for July, out at 10 a.m. Eastern.

In Fed news, Boston Fed President Eric Rosengren and Chicago Fed President Charles Evans both appeared at an event in Shanghai, China, and showed both sides of the Fed debate over raising interest rates.

Rosengren said the Fed is close to achieving its employment and inflation target, while Evans hinted he was in no rush to tighten policy.

+1

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ryan foreman wrote:

IMO, the presentation of the financial statements are not an issue with "Non GAAP" numbers. The GAAP numbers are easily found and they are clear. Moreover, its reasonably clear how they are adjusting GAAP to get to non GAAP. I looked at the Valeant financial reports cited by Gretchen Morgenson that she criticizes. I don't see it as any big deal.

The concern to me is when media sources throw out numbers with no clarification if they are GAAP or non-GAAP and what non GAAP even is.

Again, just the very existence of a media source having a Non GAAP S&P 500 PE ratio is wrong. It is inherently misleading and its not useful to anybody.

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agip wrote:

Hey Igy -

saw this today in the journal - nutshell is that firms are being ordered not to use non-GAAP accounting as much. And they are complying.

I suppose that means earnings numbers will be bad for a year or so until we lap these out.

http://www.wsj.com/articles/companies-play-up-standard-accounting-figures-1472495965

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end of another month - vanguard total stock market index +7.1% YTD incl dividends.

and over 52 weeks +10.3% or thereabouts. Not an exact number, that one.

and for those like coach d who advocated sell in May and go away...VTI is up 5.8% since May 1.

Rock 'n' roll

2 weeks left for Igy's Dow 13,000 prediction. I'm practicing my victory dance.

U.S. stock futures on Thursday pointed to an upbeat start to the new month, as investors braced for a raft of economic data and didn't seem fazed by September's weak track record.

S&P 500 futures rose 5.25 points, or 0.2%, to 2,174.75, while Dow Jones Industrial Average futures gained 50 points, or 0.3%, to 18,445. Nasdaq-100 futures tacked on 15 points, or 0.3%, to 4,788.75.

On Wednesday, the S&P 500 closed 0.2% lower for the session and down 0.1% for August, while the Dow shed 0.3% and lost 0.2% for the month. The S&P ended a five-month winning streak, and the blue-chip gauge halted a six-month advance.

The S&P has dropped in September 57% of the time, and it's the month with the weakest average performance, said Sam Stovall, U.S. equity strategist at S&P Global Market Intelligence, in a note.

"Monthly price declines and frequencies of negative returns were even greater during presidential election years without an incumbent candidate," Stovall said.

Economic news: A report on weekly jobless claims is slated to hit at 8:30 a.m. Eastern Time, with economists polled by MarketWatch forecasting 265,000 claims.

At that same time, a release on second-quarter productivity and labor costs is expected, with economists predicting a 0.6% drop in productivity but 4.1% growth for costs.

At 9:45 a.m. Eastern, Markit is slated to deliver an August reading on manufacturing, and an Institute for Supply Management figure for that sector is due 15 minutes later. ISM's gauge is expected to come in at 52.1% for last month.

A report on construction spending in July is due at 10 a.m. Eastern, with economists forecasting 0.6% growth, and August figures for auto sales are also on tap for Thursday.

The barrage of data comes before Friday's much-anticipated monthly jobs report.

U.S. stock futures inched higher Friday, but investors were still cautious ahead of the much-anticipated jobs report, which could set the stage for an interest-rate increase as soon as this month.

Futures for the Dow Jones Industrial Average added 16 points, or 0.1%, to 18,411, while those for the S&P 500 index tacked on 0.70 point to 2,167.50. Futures for the Nasdaq-100 index were up 6.50 points, or 0.1%, to 4,784.

The muted moves mirror the trading action for most of this week, when investors have been looking toward one key data set: the nonfarm payrolls number. For the week, all three major benchmarks were on track for gains of less than 0.2%.

Federal Reserve Chairwoman Janet Yellen last Friday indicated at least one rate hike is on the cards this year. Traders hope the August jobs report will provide clues as to whether the first tightening could come at the Fed's September meeting.

"It may take an extreme anomaly in Friday's NFP report to abruptly cool the heated expectations over the Fed raising rates at least once this year," said Lukman Otunuga, research analyst at FXTM, in a note.

Economists polled by MarketWatch expect 170,000 jobs were added to the U.S. economy in August, while the broader market consensus is for about 180,00 jobs, according to FactSet.

"A figure below 150,000 could renew concerns over the health of the U.S. economy and potentially erode optimism towards September being a 'live' meeting to act. In extreme cases, a repeat of May's dismal employment report figure of 38,000 could temporarily sabotage all efforts taken by the Fed to act," Otunuga added.

Stocks on Thursday finished mixed in anticipation of the report, clawing back earlier losses that were fueled by disappointing data on manufacturing activity.

The nonfarm payrolls report comes out at 8:30 a.m. Eastern Time, along with the unemployment rate for August, which is expected to dip to 4.8%, from 4.9% in July. Average hourly earnings for August and the trade balance for July are also due at that time, followed by July factory orders at 10 a.m. Eastern.

The underwhelming jobs report likely means no rate hike this month, so up we go.

Big,

How long can bad is good go on?

Igy

Wait so now your against the Fed doing nothing?

smarter,

The Fed should have raised interest rates three years ago. The speculation is so extreme it makes little difference what the Fed does at this point. The Bubble will pop.

Igy

Ok I thought you didn't like the Fed interfering. My bad.

Another positive week! What's that, 7 out of the last 8? Life is grand!

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Big Dog Investments wrote:

The underwhelming jobs report likely means no rate hike this month, so up we go.

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Silver up 3.4% in one day, life is grander....

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Stating what's obvious wrote:

Another positive week! What's that, 7 out of the last 8? Life is grand!

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U.S. stock futures inched higher Tuesday, putting the market on track to add slightly to last week's gain as traders returned from a three-day weekend.

S&P 500 futures edged up by 3 points, or 0.1%, to 2,181, while Dow Jones Industrial Average futures tacked on 26 points, or 0.1%, to 18,506. Nasdaq-100 futures rose by 6.25 points, or 0.1%, to 4,801.50.

Analysts are bracing for the market to show more oomph after some August doldrums.

The "worst of the quiet summer period" has passed, and investors now "can expect to see trading volumes pick up significantly this week," said Craig Erlam, senior market analyst at Oanda, in a note on Tuesday.

The U.S. stock market was shuttered on Monday in honor of the Labor Day holiday.

On Friday, the S&P 500 and Dow both closed 0.4% higher and up 0.5% for the week. That came as a weaker-than-expected monthly jobs report bolstered the view that the Federal Reserve won't raise interest rates in September, fueling a rally in stocks and other assets perceived as relatively risky.

Each stock gauge on Tuesday is within striking distance of its mid-August record closing high.

Other markets: The U.S. oil benchmark traded higher, helped by Monday's agreement between Russia and Saudi Arabia on monitoring crude prices. European stocks were slightly higher, gold futures gained, and a key dollar index lost ground. Asian stock markets were broadly higher Tuesday, though Australian equities fell after the central bank there kept interest rates unchanged, and the Philippine benchmark fell after U.S. President Obama canceled a meeting with the country's leader.

Economic news: The August reading on Markit's purchasing managers' index for the U.S. service sector is expected to hit at 9:45 a.m. Eastern Time. The Institute For Supply Management's non-manufacturing index for the same month is due at 10 a.m. Eastern.

"The services sector is hugely important to the U.S. economy, and so this data offers important insight into how the main engine of growth is likely to perform in the months ahead," Erlam said.

September 2, 2016

Earnings Scorecard: With 498 of the companies in the S&P 500 reporting earnings to date for Q2 2016, 70% have reported earnings above the mean estimate and 53% have reported sales above the mean estimate.

Earnie,

You forgot to mention the more pertinent information that 179 out of 492 Beat on GAAP earnings, or 36%. Also, the hurdle rates for GAAP, non-GAAP and sales were all lowered coming into the quarter.

Igy