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Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:

Price-Earnings Ratios on U.S. Stocks Drop, Aiding Bull Market [Bloomberg]

Summary: U.S. stocks are less expensive relative to earnings than they were at the beginning of the bull market four years ago. The S&P 500 is valued at about 17x its members' EPS, down from 26x in October 2002 -- the first time the index's P/E has declined in a bull market since at least 1960. The 17x P/E is half that of the Russell 2000, an index of smaller companies, suggesting that investors are undervaluing larger-cap companies on a relative basis. The S&P 500 has risen 76% since 2002; last month, the index reached its highest level since November 2000 as earnings exceeded analyst expectations. Though earnings have grown for a dozen straight quarters, some expect the pace to slow in 2007 as economic expansion slackens and GDP shrinks. Consumer confidence indices are falling, and Wal-Mart's recent forecast that its November same-store sales will be flat is considered by many a harbinger of things to come.
Related links: Earnings Season So Far: S&P 500 Beat Quarters Up, Guidance Raisers DownS&P500 Reaches 75 Days Without a 1% Decline - Longest Such Streak Since 1995U.S. Large Caps Trending Positively
Potentially impacted ETFs: Standard & Poor's 500 Index Depository Receipts (NYSEARCA:SPY) • iShares S&P 500 (NYSEARCA:IVV)

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