One observation that UBS offered up was that while the S&P 500 has doubled off its financial crisis low in March 2009, the forward price-to-earnings ratio that the index has been afforded has actually contracted, going from a peak of more than 15x early in the recovery to a multiple of 12x right now, a decline of roughly 20%.
"In our view, stock investors have been unwilling to 'pay up' for earnings results due to an exceptionally high level of uncertainty about the future direction of the economy and corporate profits," the firm said.
Since the uncertainty is as thick as ever right now -- Monday's rally aside -- investors may want to see more evidence that a grand bargain might be in offing before ponying up.
As for Tuesday's scheduled news, the holiday-shortened trading week will still see its share of high-profile earnings reports. Best Buy's (BBY) numbers are slated to hit the tape in the a.m. and Wall Street is looking for third-quarter earnings of 12 cents a share from the Minneapolis-based consumer electronics retailer on revenue of $10.73 billion.All the back-and-forth about a potential buyout by Best Buy founder Richard Schulze hasn't translated to any appreciation in the stock, which is down more than 40% so far this year, hitting a 52-week low of $13.52 on Friday. The company, which enacted significant layoffs over the summer, continues to struggle to shake its rep as "Amazon's showroom." Most recently Best Buy announced a management shake-up and warned of weak results for the third quarter in late October so expectations are pretty low headed into the print. UBS, which has a neutral rating on the stock, lowered its 12-month price target to $14.50 from $16.75 on Monday. "A lot of the mystery has been taken out of BBY's 3Q given its preannouncement and recent investor meeting," the firm said. "The focus will be on how the company is positioned for the holidays and recent trends. We are forecasting a -2% domestic comp and -85 bps of domestic GM [gross margin] erosion in 4Q, but a wide range of outcomes is possible, especially with BBY's new price match policy in place."
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