Earnings Are Up. Why Aren't Stocks?
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Your Money Briefing. Money and Market Stories from The Wall Street Journal. I'm J.R. Whalen in New York. It's been a stellar earnings season, but why aren't stocks flying high? We'll have answers in a moment, but first, these money headlines. While many of America's biggest retailers have been slashing staff even faster than they have been closing stores... mainly as a result of competition from Amazon, it's left them with fewer clerks and longer checkout lines at remaining locations. Well, now some retailers are discovering they may have gone too far and are beginning to replenish staff just as the booming U.S. economy is creating historic labor shortages. and forcing companies to pay higher wages and offer perks such as better training and benefits.
And with 4.1 U.S. unemployment rate and Federal Reserve officials forecasting 3.6 percent by next year, that'd be the lowest in half a century. Civic leaders throughout the country are asking themselves, why not pay people to move here? The idea has spread where a strong economy, an aging population, and an exodus of younger workers have triggered severe labor shortages, often places with very low unemployment rates and higher than average wage growth.
What money headlines and retail labor trends are highlighted before the main interview?
That's why small towns across America, instead of offering incentives to employers... are giving it to workers one by one. And the Manhattan townhouse, owned for decades by the family of Malcolm Forbes, the late chairman and editor-in-chief of Forbes magazine, is returning to the market for $28.5 million after a major renovation. The Greek Revival townhouse is located around the corner from the former Forbes headquarters along New York's Fifth Avenue. Forbes died in 1990 at age 70. He was known for his lavish lifestyle and for broadening the influence of the magazine his family founded in 1917. He bought the townhouse in the early 60s and used it purely for entertaining and hosting visiting celebrities and dignitaries.
This is your Money Briefing from The Wall Street Journal. Welcome back, everybody. Is there such a thing as too much good news? Well, that might be the case as it relates to U.S. companies delivering news to their investors. And Wall Street Journal Heard on the Street columnist Charlie Grant is here with some details. So, Charlie, we're in the midst of a particularly strong earnings season, and I wish I could coin the phrase happy days are here again, but somebody already beat me to that. But you point out in your column, amid the upbeat news, stocks are not really feeling all the love.
It's been a great earnings season by most measures. About 80% of companies have hit analyst estimates for earnings per share or beaten them. And on average, those companies are reporting earnings growth north of 20%, which sounds great, right? Yeah, exactly. The thing, though, is that the S&P 500 is basically flat so far this year. So all this good news in aggregate is doing absolutely nothing to push stocks higher.
And that's a lot because stocks are more forward looking. And as far as Wall Street's concerned, maybe the future isn't as as rosy as it is right now.
Yeah. Well, I mean, the way I would look at it is that the investors have been paid in advance for this quarter already. So when tax reform was passed. Investors expected a big bump in earnings, and we've seen that in the first quarter since the new tax law took effect. All that is great. As you'll recall, the stock market was surging all through last year. I think what you're seeing is stock prices having already anticipated this news. Right now, that good news has pushed stocks up as far as they'll go.
And some of this has to do with lower tax rates, which many companies achieve by booking profits overseas. How can that cloud the crystal ball?
Well, you know, lowering your tax rate to grow earnings, you know, you can sell more stuff, you can cut expenses or you can keep more of your pre-tax earnings and turn that into after-tax income. And when your tax rates are as low as we're starting to see, like Alphabet booked an 11% effective tax rate, Google's parent.
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