Despite Modest Losses in the S&P 500, Market Performance Continues to Broaden Out

Performance for Week Ending 2.6.2026:

The Dow Jones Industrial Average (Dow) gained 2.5 percent, the Standard & Poor’s 500 Index (S&P 500) dipped 0.1 percent, and the Nasdaq Composite Index (Nasdaq) fell 1.8 percent for the week ending Feb. 6. Sector breadth was positive, with eight of the 11 S&P sector groups closing higher. The consumer staples sector (6 percent) was the best performer, while the consumer discretionary sector (-4.6 percent) was the weakest.

*See below for Index Definitions

MARKET OBSERVATIONS: 2.2.2026–2.6.2026

The S&P 500 finished the week modestly lower, in very volatile trading, as technology stocks came under pressure following mixed earnings results and concerns over AI infrastructure spending. The week was also marked by labor market concerns, turbulence in the cryptocurrency market, and sector rotation dynamics. While the S&P finished lower, overall market performance continued to show signs of broadening out beyond the technology sector, especially amongst areas levered to the underlying strength of the economy. Small- and mid-cap stocks, represented by the Russell 2000 and S&P 400 Midcap Index, finished the week solidly higher. Cyclical sectors like materials, industrials, and energy have posted some of the best year-to-date gains.

Fed Speak: Atlanta Federal Reserve (Fed) President Raphael Bostic said that he believes the Federal Open Market Committee (FOMC) should hold rates steady in 2026 and that it will take time for Kevin Warsh, the nominee to replace Jerome Powell as Fed Chair, to convince a majority of the committee that rates need to be lower. Fed Vice Chair for Supervision Lisa Cook said that she believes that the balance of risks is tilted more toward elevated inflation and that the FOMC cannot lose sight of its mandate to lower the pace of price growth. She added that the 75 basis points of rate reduction at the end of 2025 should help support the labor market. Fed Governor Stephen Miran said the absence of strong price pressures in the economy means interest rates, which he described as restrictive, need to be lowered again this year. Miran dissented against the Fed’s recent decision to hold rates steady, in favor of a quarter percentage point cut. Richmond Fed President Tom Barkin said last year’s three interest rate reductions have helped bolster the labor market as officials now look to bring inflation back down to the central bank’s target. Barkin added that the economic outlook is improving as uncertainty fades, but risks remain with hiring concentrated in a few sectors and inflation still running above the Fed’s 2 percent goal.

Q4 Earnings: Through Feb. 6, 291 companies in the S&P 500 have released fourth quarter results, with just over 79 percent beating expectations. Aggregate earnings for this group are up 13.6 percent from a year ago, solidly ahead of the current 12.3 percent projected year-over-year growth rate for the overall quarter. On the sector level, the biggest upside surprises have come from materials and industrials, while the biggest year-over-year growth rates are seen in the materials and technology sectors. According to Bloomberg, consensus expectations are for S&P 500 earnings to total 13.1 percent for 2025 and by 13.7 percent this year.

Economic Roundup: Last week’s labor market data showed the U.S. job market may have hit a rough patch. Job openings unexpectedly fell in December to the lowest level since 2020 and layoffs edged up, adding to evidence of sluggish demand for workers. Meanwhile, the number of Americans filing new applications for unemployment benefits increased more than expected, likely boosted by snowstorms across much of the country. Initial claims for state unemployment benefits jumped 22,000 to a seasonally adjusted 231,000. Continuing claims, which measure the number of people receiving ongoing unemployment benefits, increased 25,000 to a seasonally adjusted 1.844 million during the week ended Jan. 24. Elsewhere, payroll processor ADP released a report showing private sector employment in the U.S. increased by much less than expected in the month of January. ADP said private sector employment rose by 22,000 jobs in January after climbing by a downwardly revised 37,000 jobs in December. Economists had expected private sector employment to grow by 45,000 jobs. Lastly, outplacement firm Challenger, Gray & Christmas said layoffs intentions surged in January to their highest point for a January report since 2009, led by the transportation sector. Challenger said the jump in layoffs suggests employers are less optimistic about the outlook in 2026.

In other economic news, U.S. factory activity in January expanded for the first time in a year, boosted by surges in new orders and production, the Institute for Supply Management (ISM) reported. The ISM manufacturing index showed a reading of 52.6 for the month, a 4.7-point increase from December and well ahead of the Bloomberg consensus estimate for 48.5. Prior to the last expansion reading, the index was in contraction territory, or below 50, for 26 straight months. Within the survey, the forward looking new orders index jumped 9.7 points to 57.1.

Outlook: Despite the uptick in volatility in recent weeks, it is important to separate headline political and geopolitical noise from an otherwise robust macroeconomic backdrop. The focus should be on what actually drives stock prices—earnings, the economy, and interest rate policy, all of which we think are in a favorable place. The U.S. economy is growing, earnings are forecast to grow at a double-digit pace, and the Fed is expected to maintain an easing bias, while fiscal policy from the One Big Beautiful Bill Act will be a tailwind during the first half of the year. History books suggest that bull markets rarely end when the Fed is easing and both the economy and earnings are growing. Typically, bull markets end when the Fed begins raising rates, not cutting, and we just don’t see rate hikes any time in the foreseeable future.

The Week Ahead: The focus of this week’s data calendar will be the delayed January jobs report (Wednesday) and the rescheduled January consumer price index (CPI) data on Friday. In terms of the labor market report, economists are expecting nonfarm payrolls to grow by 70,000 and for the unemployment rate to hold steady at 4.4 percent. Other notable data released include December retail sales and the fourth quarter employment cost index on Tuesday. The fourth quarter earnings calendar will begin to wind down with start to slow with 77 members of the S&P 500 scheduled to release results. Amongst this group will be results from Cisco, Applied Materials, Coca-Cola, and McDonald’s. The Fed speaking calendar will be busy with almost a dozen members of the Fed expected to make presentations during the week.

— By Michael Schwager, Chief Market Strategist, Managing Director

Definitions

The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since Oct. 1, 1928.

Standard and Poor's 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Nasdaq Composite Index is a broad-based capitalization-weighted index of stocks in all three Nasdaq tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of Feb. 5, 1971.

This material contains opinions of the author, but not necessarily those of Guggenheim Partners, LLC or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.