Market looking Tired as we enter into the Summer Doldrums

The S&P 500 finished the week little changed as investors digested a handful of high profile earnings misses, signs the economy picked up some steam during the second quarter and a rally in the price of oil.

July 31, 2017    |    By Mike Schwager

Performance for Week Ending 7/28/2017:

The Dow Jones Industrial Average (Dow) gained 1.16%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) finished unchanged, the Standard & Poor’s 500 Index (S&P 500) finished off 0.02% and the Nasdaq Composite Index (NASDAQ) dipped by 0.20%. Sector performance was mildly positive with 6 of the 11 S&P sector groups finishing higher. The Telecom (+6.99%) sector posted the best gain while Healthcare (-1.26%) was the laggard.

Index* Closing Price 7/28/2017 Percentage Change for Week Ending 7/28/2017 Year-to-Date Percentage Change Through 7/28/2017
Dow 21830.31 +1.16% +10.46%
Wilshire 5000 25711.99  0.00% +9.76%
S&P 500 2472.10 -0.02% +10.42%
NASDAQ 6374.68 -0.20% +18.42%

*See below for Index Definitions

MARKET OBSERVATIONS: 7/24/2017 – 7/28/2017

The S&P 500 finished the week little changed as investors digested a handful of high profile earnings misses, signs the economy picked up some steam during the second quarter and a rally in the price of oil. Crude posted its best weekly performance since last December following a larger than expected drawdown in inventory levels, a pledge from Saudi Arabia to curtail production levels, and signs US shale producers are reducing capital spending. On the economic front, the preliminary estimate of Q2 GDP showed the economy expanding by 2.6%, slightly below the 2.7% gain expected by economists but well ahead of the downwardly revised 1.2% growth in the first quarter.

Q2 Earnings Season: Second quarter earnings have generally been a positive catalyst for the equity market. Through Friday, 287 members of the S&P 500 have reported results with nearly 78% surprising to the upside. Revenues are also coming in better than expected with 72% of companies beating top-line expectations. Aggregate S&P 500 earnings are tracking at a very solid 10.5% year-over-year rate. If the current pace of growth holds, it would mark the second consecutive quarter of double digit gains.

FOMC Meeting: As was widely expected, the Federal Reserve left interest rates unchanged at the conclusion of its two-day meeting and hinted that it will begin winding down the size of its balance sheet “relatively soon” –likely implying an announcement at the September 19-20 meeting. At a recent testimony to the House Financial Services Committee, Fed Chair Yellen said she anticipates the balance sheet will be "appreciably below" current levels as the Fed unwinds its bond portfolio, although the portfolio will remain higher than levels before the 2008 financial collapse. While policy is expected to tighten over the coming quarters, the expected uptick in global growth should offset the headwind of higher rates.

Bottom-Line - Outlook Unchanged: While we believe the bull market remains intact, elevated valuation levels and unfavorable seasonals during the summer months, raise the odds of some near-term turbulence. The “Goldilocks” environment (not too hot, not too cold), however, should help limit the downside risk. From a macro point of view, the world is enjoying a period of synchronized global growth, which in turn, has led to a favorable turn in the earnings environment. In addition, valuation levels—while not cheap—are far from excessive. If the market were to stage a pullback in the coming weeks/months, it would be viewed as healthy and corrective in nature and not the start of a broader leg lower - in other words, a good buying opportunity, especially for longer-term investors.

The Week Ahead: Earnings will remain in focus during the coming week with 129 members of the S&P 500 scheduled to report results. Included in this group are Dow components: Apple and Pfizer, who will both report on Tuesday. The data calendar will also be relatively busy. Reports of interest include; June pending home sales index, July motor vehicle sales, June personal income and spending, the July ISM manufacturing survey, June construction spending, the July ADP Employment Report and the July ISM non-manufacturing survey. On Friday the closely watched monthly payroll data will be released. According to Bloomberg, non-farm payrolls are expected to grow by 185K while the unemployment rate is forecast to dip to 4.3% (from 4.4%). The Fed speaking calendar will be light with only Cleveland president Loretta Mester and San Francisco president John Williams scheduled to speak.


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 October 1, 1928.

Wilshire 5000 Total Market IndexSM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.

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 February 5, 1971.

Indices do not include any expenses, fees, or sales charges, which would lower performance. Indices are unmanaged and should not be considered an investment. It is not possible to invest directly in an index.

The individual companies mentioned in this piece were for informational purposes only and should not be viewed as recommendations.

The comments should not be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader themes. This document contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the individual strategist. Information in this report does not pertain to any investment product and is not a solicitation for any product. This material has been prepared using sources of information generally believed to be reliable. No representation can be made as to its accuracy.

Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objective, risks charges, expenses and the other information, which should be considered carefully before investing. To obtain a prospectus and summary prospectus (if available) click here or call 800.820.0888.

Investing involves risk, including the possible loss of principal.

Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, Guggenheim Partners Japan Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC.

© Guggenheim Investments. All rights reserved.

Research our firm with FINRA Broker Check.

• Not FDIC Insured • No Bank Guarantee • May Lose Value

This website is directed to and intended for use by citizens or residents of the United States of America only. The material provided on this website is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation. Investing involves risk, including the possible loss of principal.