All three major U.S. indices were down Thursday, with the S&P 500 down 1.4%, a worse loss than the morning’s loss of 1%. Thursday was plainly risk-off, with the 10 year treasury yield slipping to 0.59%. Yields fall when prices rise.
The Federal Reserve announced that it is expanding its $600 billion business lending program to get mid-sized companies more access to capital. This likely doesn’t impact small business’ ability to access the Paycheck Protection Program run through the Small Business Administration and appropriated by Congress. The SBA has made it clear of late than small businesses are the priority in that program and that larger companies must respect the capital needs of small business, which represents a majority of employment in the U.S.
Still, the market, to many, is richly valued at more than 20 time 2020 earnings and more than 17 times 2021 earnings.
McDoanld’s earnings weren’t bad. The company posted $4.7 billion in revenue, beating estimates, but said the negative U.S. sales trends it saw to end March were bleeding into April. Most companies are getting a pass on that dynamic, as the market looks into 2021, pricing in a rebound and assuming the end of lockdowns. But McDonald’s had soared 11.5% for April into earnings and now trades expensively compared to its history, at roughly 28 times next year’s earnings.
This comes as consumer spend fell 7.5% for April and 3.5 million more people said they are unemployment in the past week, all f which the market had anticipated, but valuations are now stretched.
Also, strategist at Morgan Stanley, Mike Wilson, sees the S&P 500 hitting resistance at 2,900, which it has touched and then traded under this week.
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