Wednesday's Scoop: Energized☀️

Hey friend - here’s what you need to know today…

1. Americans have cut back on credit card spending.

2. US exports boomed in 2023.

3. Mortgage costs surged this past week.

S&P 500: 4,995.06
1Mo: +5% | 1Yr: +21% | 5Yr: +85%

The market drifted to another record high today as investors digested more corporate financial reports that seem mostly positive.

Americans have shied away from borrowing amidst tighter budgets and higher interest rates. The Federal Reserve reported December had the smallest monthly increase in consumer debt in months. Revolving debt, which primarily includes credit cards, increased only 1% in December after a 17% rise in November. An earlier Fed report showed credit card and auto loan delinquencies were at their highest point in over a decade during the holidays. These are signs that the almighty American consumer is feeling strained.

The US dominated international trade last year. The US trade deficit, how much we import minus our exports, shrank by the most in over 14 years. American exports hit a record high. Some of the most significant growth has been in petroleum exports. The US is now a net oil exporter, reducing our reliance on foreign producers.

Mortgage costs soared this past week, stalling home buying. The Mortgage Bankers Association said applications to purchase a home fell 1% last week, down 19% from a year ago, thanks to an uptick in rates. However, that doesn’t even capture the move from the past few days. Shifting expectations about when policymakers will reduce short-term rates sent long-term rates soaring. The average rate on the 30-year fixed-rate mortgage saw the third-largest jump since March 2020.

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What is the EPS companies are beating and missing?

Earnings Per Share (EPS) is one of the two main metrics you'll find in the news about a corporation's quarterly financial update. Earnings is another word for profit, and so is net income. Earnings per share are the company's profit divided by the number of shares available. It's a standard way for an investor to evaluate whether the company is earning more or less profit this quarter than the investor expected.

Understanding how much the stock price is marked up over the company's profitability is also helpful. That's called a price-to-earnings multiple (P/E multiple). If one company's share price is 15x higher than its earnings per share, investors are more confident in its future growth than a company whose share price is 12x its EPS.