Corrected: S&P 500 closes at record high, even as EPS growth stagnates
(This March 23 story has been refiled to correct paragraph 8 to refer to communication services sector, not consumer services sector) By Noel Randewich and Stephen Culp (Reuters) - Wall Street set a record high on Tuesday, confirming that a decade-old bull market is still kicking following a slump late last year, even as corporate earnings stagnate and the U.S.-China trade dispute drags on.
(This March 23 story has been refiled to correct paragraph 8 to refer to communication services sector, not consumer services sector)
By Noel Randewich and Stephen Culp
(Reuters) - Wall Street set a record high on Tuesday, confirming that a decade-old bull market is still kicking following a slump late last year, even as corporate earnings stagnate and the U.S.-China trade dispute drags on.
The widely followed S&P 500 marked its highest ever close, beating its previous record closing high on Sept. 20, and the Nasdaq beat its Aug. 29 all-time closing high.
The S&P 500 has rallied 25% from Dec. 24, reversing a steep selloff caused by fears of higher interest rates and uncertainty around U.S. President Donald Trump's trade war with Beijing. Dec. 24 marked the bottom of last year's selloff.
The S&P 500 has slightly underperformed European stocks over the same time period.
S&P 500 vs. world indices Image https://tmsnrt.rs/2W3escq
But as the S&P 500 has recovered, corporate earnings growth has slowed, and even shrunk, following a surge last year on the back of deep U.S.corporate tax cuts. Analysts on average expect earnings per share for the quarter to fall 1.3% year over year, according to I/B/E/S data from Refinitiv.
Q1 earnings expectations https://tmsnrt.rs/2W65kUo
While expectations for first-quarter EPS have improved over the past three weeks, forecasts for full 2019 EPS growth have become less optimistic, now at 3.0% growth, down from 3.3% at the start of the month. That is partly due to uncertainty related to global trade.
S&P 500 2019 earnings expectations https://tmsnrt.rs/2W4aRe7
Higher stock prices and expectations for slower earnings growth have pushed forward price/earnings multiples back up to the levels that worried some investors the last time Wall Street peaked. The S&P 500's forward PE stands at almost 17, up from 14 at the start of the year, according to Datastream.
S&P 500 forward P/E Image https://tmsnrt.rs/2W1xtvZ
Since the S&P 500's September high, utilities have been the top performing S&P sector, up 9%, followed by communication services and real estate, both up 7%.
S&P 500 sectors https://tmsnrt.rs/2IEn0Ue
Buoyed by bets about the upcoming rollout of 5G telecommunications infrastructure, chipmaker Xilinx has been the top-performing S&P 500 stock since Sept. 20, up 74%, while CenturyLink's 47% loss has made the telecoms service provider the worst performer.
S&P 500 top performers https://tmsnrt.rs/2ICbNDo
S&P 500 bottom performers https://tmsnrt.rs/2IzHFZz
Among the top 10 performers since Sept. 20, only Twitter has a forward PE that has declined during that time.
Forward PEs of top S&P 500 stocks https://tmsnrt.rs/2W0QfUd
With the Federal Reserve widely viewed as "on pause" after hiking interest rate four times last year, the 10-year U.S. Treasury yield has dropped to 2.6% from highs of over 3.2% last November.
S&P 500 and 10-year Treasury yield Image https://tmsnrt.rs/2W4gLfh
(Reporting by Noel Randewich in San Francisco and Stephen Culp in New York; Editing by Alden Bentley and Leslie Adler)
This story has not been edited by Firstpost staff and is generated by auto-feed.
By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States
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