The best stocks are having the worst time in the US stock market session, with the Dow Jones Industrial Average down more than 600 points at 1 pm Eastern Time.

Among the worst performers are market favorites like Boeing, Caterpillar and Intel, about which there is no news. Boeing has swung in a 10% range during the past week, suffering one of the worst declines in last week’s market free-fall, only to recover most of its lost ground before falling again today.

The usual explanation that the market fears a rise in bond yields can’t be all, nor indeed most of the story. Treasury yields were flat today while the stock market plunged. Simple explanations are the best, and the simplest is that investors do not know what stocks are worth once the price-earnings ratio climbs to 18x on forward earnings. All this suggests that the stock market will have to chop sideways for a while and consolidate earnings performance before investors will offer even higher prices for stocks.

Since 2011, the S&P 500 Index has roughly tripled. About half the increase was due to higher earnings and about half due to higher valuations. The market appears to be telling us that earnings rather than valuations will have to do the heavy lifting for the next year or two.

S&P 500 price vs pe ratio
Source: Bloomberg