Markets Break Three Week Winning Streak

Stocks finished the week mostly lower, with the S&P 500 breaking a three-week winning streak, as investors weighed another round of higher than expected inflation readings, mixed signals from the Fed, rising coronavirus infections, and some lackluster economic data.

July 19, 2021    |    By Michael Schwager

Performance for Week Ending 7.16.2021:

The Dow Jones Industrial Average (Dow) finished off 0.52%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) lost 1.67%, the Standard & Poor's 500 Index (S&P 500) dipped 0.97% and the Nasdaq Composite Index (NASDAQ) shed 1.87%. Sector breadth was negative with 8 of the 11 S&P sector groups closing lower. The Energy sector (-7.72%) paced the losses followed by Consumer Discretionary (-2.63%) and Materials (-2.35%).

Index* Closing Price 7/16/2021 Percentage Change for Week Ending 7/16/2021 Year-to-Date Percentage Change Through 7/16/2021
Dow 34687.85 -0.52% +13.33%
Wilshire 5000 44920.28 -1.67% +13.85%
S&P 500 4327.16 -0.97% +15.20%
NASDAQ 14427.24 -1.87% 11.94%

*See below for Index Definitions

MARKET OBSERVATIONS: 6/12/21 – 7/16/21

Stocks finished the week mostly lower, with the S&P 500 breaking a three-week winning streak, as investors weighed another round of higher than expected inflation readings, mixed signals from the Fed, rising coronavirus infections, and some lackluster economic data. Fed Chairman Jerome Powell also made his semi-annual appearance on Capitol Hill where he assured members of Congress that inflation will moderate and that the central bank plans to maintain its current monetary policies. Powell said that the central bank can wait before it starts to ease its bond purchases despite surging inflation readings as he still expects inflation to moderate. “At our June meeting, the Committee discussed the economy's progress toward our goals since we adopted our asset purchase guidance last December. While reaching the standard of ‘substantial further progress’ is still a way off, participants expect that progress will continue,” Powell said.

Treasury Secretary Janet Yellen echoed Powell's comments by saying she expects “several more months of rapid inflation” before price pressures begin to subside. “I'm not saying that this is a one-month phenomenon. But I think over the medium term, we'll see inflation decline back toward normal levels. Yellen added that she is also concerned with the ongoing rise in Delta-variant coronavirus infections in major economies around the world. According to media reports, Covid cases are rising in almost every US state as the Delta variant attacks unvaccinated populations across the country. The worries were underscored when Thursday's Yankees-Red Sox baseball game was canceled due to several players testing positive. It was the first time in three months that a game has been canceled due to Covid. Los Angeles County also announced they will reinstate indoor mask requirements in public spaces, regardless of vaccination status, amid an alarming rise in Covid cases driven by the Delta variant. The action prompted fears that other regions around the country could follow suit and potentially lead to new lockdowns.

Meanwhile, the release of the Fed's Beige Book—which is based on anecdotal information collected by the 12 regional Fed banks—showed the US is growing faster, but the recovery is being restrained by widespread shortages of labor and supplies. “The U.S. economy strengthened further from late May to early July, displaying moderate to robust growth,” according to the report. By contrast, the Fed characterized growth in the spring as just “moderate.” The Beige Book found plenty of evidence of shortages throughout the country. “Supply-side disruptions became more widespread, including shortages of materials and labor, delivery delays, and low inventories of many consumer goods,” the survey said. Businesses told the Fed they're not sure when they'll be able to ramp up production to satisfy all the pent-up demand as they still can't get many supplies on time and many open jobs are going unfilled.

Bullish Narrative Intact: As we enter into the second half of the year, our favorable view on the equity market remains intact. While second half gains are unlikely to be as robust as what we saw during the first six months of the year, we feel the supportive macro environment should continue to provide a sturdy backbone for additional upside. The US economy continues to recover, and growth is expected to remain solid over the remainder of the year. The US consumer is in good shape and savings rates have become very elevated, suggesting that as consumers become more comfortable with the economic recovery, pent up demand will be unleashed. Earnings expectations also continue to trend higher. Based on consensus expectations from Bloomberg, earnings are forecast to grow by over 36 percent this year followed by over 11.9 percent growth in 2022. While a near-term period of consolidation cannot be ruled out, we would view pullbacks as a ‘pause to refresh’ and not the start of a broader move lower. Hence, periods of weakness would be viewed as buying opportunities.

The Week Ahead: The earnings calendar will move to the front burner this week with nearly 80 members of the S&P 500 scheduled to release results. While early, earnings season has gotten off to a solid start. Through Friday, 39 members of the S&P 500 have released results with just over 87% surprising to the upside. When all is said and done, analysts are forecasting that earnings will grow by over 70% on a year-over-year basis. If companies deliver on those estimates, it will be the largest growth rate since the fourth quarter of 2009 when earnings grew by nearly 109%. The data calendar will be relatively light with the focal point being the Markit PMI readings on Friday. Other reports of interest include; June housing starts, the leading economic indicators report for June, initial jobless claims, and June existing home sales. Following a busy few weeks in terms of Fed speakers, the week ahead will be particularly quiet as FOMC participants enter their blackout period ahead of the July 27-28 FOMC meeting. On the political front, Senate Majority Leader Chuck Schumer has scheduled a vote on the bipartisan infrastructure package for Wednesday in an effort to get the bill done ahead of the August recess. On Friday, the Tokyo Summer Olympics will get underway with the opening ceremonies. Tokyo remains under a state of emergency and spectators will not be in attendance.


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.

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.

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