FactSet data show that last Friday the S&P500 was trading at 19x expected consensus earnings, which is under its five-year and ten-year averages.
A combination of high forward earnings reports are set against a higher cost of capital, with 10-year Treasuries (TMUBMUSD +5.136%) falling to 5.097% last Friday which is below its recent high rate of 5.31% October 5. The yield on 30-year Treasuries (TMUBMUSD30Y +5.472%) also had a coupon rate which was at its “highest level in decades” according to Joseph Adinolfi for MarketWatch. Prices were correct as of 19.30GMT.
The lower traded value of US government debt reflects concerns about core inflation, linked to a continued trend of higher oil prices (CLOO -0.65%) and (BRNOO -0.44%). Yield reflects value-at-risk of the debt covenant and moves inversely to price. So higher yields mean the market price of debt declines.
The yield change last week likely reflected a higher demand for ‘safe haven’ stocks following outflows from CoreWeave (CRWV -.193%) on concerns about its leverage ratio. Yields on some of its unsecured debt reached 15%. Its net debt is valued at $52bn including lease obligations. However, analyst Brent Twill set a $150 price target, over 140% of current levels, based on a high expectation of future revenue for its specialised cloud computing services.
According to Dow Jones Market Data, 70% of indexed stocks posted weekly increases, while 30% posted a loss in value. Investors were leaning towards an equal-weighted version of the index SP500EW.
The Invesco S&P 500 Equal Weight ETF rose 0.5% over the week (RSP -0.20%). The IT SP500.4s fell 6.4% over the week (now +1.28%). The Consumer Staples sector SP500.30 saw a weekly gain of 5% (now -0.15%), while Healthcare SP500.35 saw a weekly gain of 3.4% (now -0.31%). The S&P 500 (SPX 0.95%) has recovered today from a 2% decline over the week prior.
It is noted that Materials (SP500.15 now +0.33%) and Utilities (SP500.55 now -1.83%) had “also jumped sharply”.
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