S&P 500 Fizzles

Thursday's impressive reversal-day rally fizzled today. The big banks reported their Q3 earnings results today. On balance, they were better than expected. However, yesterday's hotter-than-expected CPI weighed on the bond market, even though today's retail sales was relatively weak.

Our Blue Angels framework (chart below) shows that S&P 500 forward earnings have been relatively flat since it peaked in late June. The forward P/E is back down to 15.1, matching the June 16 low. In recent years, this measure of valuation has been highly inversely correlated with the 10-year US Treasury bond yield, which rose to 4.00% today (chart below).