Answer the below questions based on the Wall Street Journal article:

1. As of August 08, 2021, for year 2021, what percentage change has the S&P 500 experienced?

2. What are three occurrences or conditions that may reduce business activity in 2021?

3. How have US corporate profit margins behaved in 2021?

4. What is the S&P 50 trading at as of early August 2021?What is the five year average of this P/E ratio?

5. What is the operating margin for the S&P 500 companies?

6. Economically, what does a record operating margin mean?

7. What do strong corporate earnings mean for stock market valuations?

8. Use consumers products company Colgate Palmolive andCampbell Soup company as examples,what is the expected impact of inflation on the profits andstock process of these companies?

Article:

MARKETS

Record Pace for Corporate Earnings Keeps Stocks Buoyant

Share of firms beating analyst expectations is set for best showing ever, quelling worries for now about Covid-19 variants, stretched valuations

Karen Langley, August 8, 2021, Sunday

A solid corporate earnings season has bolstered the case for stocks.

Recent developments have had many investors expecting rockier trading in the coming months, following an 18% advance in 2021 that has taken the S&P 500 to 44 record closes. The rapidly spreading Delta variant of the coronavirus has cast a cloud over the economic outlook, and rising prices have sparked debate over whether sustained inflation will hamper the recovery. China's crackdown on corporations, meanwhile, has analysts considering the possibility of a drag on U.S. markets.

With these potential hurdles coming into view, investors have been heartened by a standout earnings season in which the share of big U.S. companies beating profit expectations is on pace for a record. What's more, companies are turning more of their sales into earnings, keeping profit margins at record highs.

"The earnings coming out have definitely helped alleviate concerns of investors that maybe earnings are not going to keep up with the pace of the stock market," said Gene Goldman, chief investment officer at Cetera Financial. "They've kept up pace."

While the bulk of earnings reports are in, investors this week will parse (analyze (a sentence) into its parts and describe their syntactic roles) results from companies including Tyson Foods Inc., eBay Inc. and Walt Disney Co.

Analysts now project that earnings from companies in the S&P 500 grew 90% in the second quarter from a year earlier, up from an estimate of 53% growth the day before the quarter's April kickoff, according to FactSet.

The unusually high growth rate highlights the rocky period that companies endured in the second quarter of 2020, when the coronavirus pandemic constricted large portions of the economy. But quarterly profits are also expected to surpass their 2019 levels.

Rising share prices have kept stock valuations elevated. The S&P 500 traded Thursday (08/05/2021) at more than 21 times its projected earnings over the next 12 months, above a five-year average of 18.5.

With 83% of the market value of the S&P 500 having reported, the operating margin for the index in the second quarter is expected to come in at 13%a hair below the record set in the first quarter, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

At a time of increased attention to inflation, the results show that big U.S. companies have succeeded in growing their sales while managing their costs. It helps that many consumers have money to spend after government stimulus checks and spending cutbacks in categories like entertainment and travel boosted their accounts earlier in the pandemic.

"It's the pricing power that a lot of these companies have right now," said Victoria Fernandez, chief market strategist and portfolio manager at Crossmark Global Investments. "Because we have consumers that have been sitting basically on the sidelines of the economy, waiting for the economy to reopen, there is a tremendous pent-up demand there."

McDonald's Corp. recently said that menu price increases of about 6% over the past year helped lift U.S. sales, and Chipotle Mexican Grill Inc. said it hadn't received pushback from customers after raising prices by about 4% earlier this year. Both restaurant chains beat earnings expectations.

The strength of corporate earnings has raised the likely trajectory for stocks in some investors' eyes. Analysts at Goldman Sachs Group Inc. last week cited higher-than-expected earnings and lower-than- expected interest rates as they raised their year-end price target for the S&P 500. They noted that most sectors are seeing profit margins expand from pre-pandemic levels.

But with costs rising and a threat of higher corporate taxes from Washington, many investors are questioning whether companies can continue to turn such high percentages of revenue into profits.

"It would be reasonable to expect that this could be a peak quarter for margins," said Rebecca Felton, senior market strategist at RiverFront Investment Group. "With the increased number of mentions of inflation in these earnings calls as management teams are doing them, it has to come out in the bottom line at some point."

Shares of Colgate-Palmolive Co. fell 4.8% on July 30 after the consumer-products company said it expects costs to chip away at its margins in the second half of the year. Campbell Soup Co. shares dropped 6.5% on June 9 after the soup maker's chief executive said he expects higher costs to squeeze profit margins in the coming months.

Money managers are also training their focus on developments around the Delta variant, which is driving up coronavirus cases in the U.S. and dividing business leaders on the question of how to respond.

"Delta clearly is a big question mark on everything," said Qie Zhang, investment director at Aberdeen Standard Investments. "If consumers are not confident in going out and spending their money, that's going to be a big pressure on economic activity overall."

2021 Dow Jones & Company, Inc. Appeared in the August 9, 2021, print edition as 'Solid Profits Ignite Stocks.'

Colgate-Palmolive, maker of consumer products such as toothpaste, said it expects costs to chip away at its margins in the second half of the year.

RICHARD B. LEVINE/ZUMA PRESS