Rally Pushed the S&P 500 Back Above 6,000

Performance for Week Ending 6.6.2025:

The Dow Jones Industrial Average (Dow) added 1.2 percent, the Standard & Poor’s 500 Index (S&P 500) gained 1.5 percent, and the Nasdaq Composite Index (Nasdaq) finished up 2.2 percent. Sector breadth was positive, with eight of the 11 S&P sector groups closing higher. The communication services (+3.2 percent) led the way, followed by technology (+3.0 percent), and energy (+2.2 percent).

*See below for Index Definitions

MARKET OBSERVATIONS: 6.2.2025  – 6.6.2025

The S&P 500 finished higher for a second straight week after the May jobs report suggested hiring remains solid despite recent market turmoil triggered by the trade war. Adding to the positive tone were signs that trade talks with China remain on track, with U.S. Secretary of the Treasury Bessent, Commerce Secretary Lutnick, and U.S. Trade Representative Greer scheduled to meet with Chinese officials in London on Monday.

Beige Book: In its periodic “Beige Book” summary of conditions, the Federal Reserve (Fed) noted that “economic activity has declined slightly since the previous report,” released April 23. According to the report, consumer spending was mixed with most districts reporting slight declines or no change while others reported that items expected to be impacted by tariffs were in high demand. Manufacturing activity declined slightly. Home sales activity was little changed, and most districts reported new home construction was flat to declining. Employment was little changed since the previous report, with most of the districts reporting flat employment. There was lower labor turnover reported and hiring was delayed due to uncertainty. Some districts reported layoffs in certain sectors, but layoffs were not widespread. Wages grew at a modest pace though many districts reporting an easing of wage pressures. Prices increased moderately since the last report, and there were reports of increased inflation expectation that were described as "strong, significant or substantial.” All districts reported that tariffs were putting upward pressure on costs and prices, with varied responses by businesses that ranged from charging higher prices to accepting lower profit margins.

Q1 Earning Season—Last Call: Through Friday, 498 members of the S&P 500 have released fiscal quarter results, with just over 77 percent beating expectations. Aggregate earnings for this group are up 12.7 percent, about double what analysts expected at the start of the quarter. On the sector level, the strongest growth rates were seen in the healthcare (+43.9 percent), communication services (+30.6 percent), and technology (+19.7 percent). Full-year growth rates, which have been trending lower in recent weeks amid uncertainty surrounding the tariff situation, may be starting to stabilize. For 2025, the growth rate is currently estimated at 7.2 percent, down from 12.5 percent at the start of the year, but unchanged from last week. For 2026 analysts are looking for growth of 13.5 percent, up from 13.3 percent a week ago.

Fed Speak: Philadelphia Fed President Harker said the U.S. economy remains resilient, and officials should maintain a wait-and-see approach until there is more clarity about how tariffs and other policies will affect the outlook. Kansas City Fed President Schmid said he and his colleagues will need to be nimble as they assess how tariffs will impact the economy, noting that while data shows that the economy remains robust, with both of the Fed’s mandates of maximum employment and stable prices close to target, the outlook is “very unclear.” Fed Governor Kugler said her main focus is now inflation, rather than a potential slowdown in economic growth, as President Trump’s tariff policies threaten to put upward pressure on prices. Kugler said she was more attuned to inflation currently because the impact of tariffs on prices will be “the first-order effect.” Chicago Fed President Goolsbee said he continues to think the U.S. central bank will be able to lower short-term borrowing costs after the “dirt in the air” of uncertainty from tariff policies gets cleared up. Fed Governor Waller said that interest rate cuts remain possible later this year even with the Trump administration's tariffs likely temporarily increase pressure on prices. Atlanta Fed President Bostic said he’s in no rush to move interest rates, adding he wants to see “a lot” more progress on inflation despite recent encouraging price data. Fed Governor Cook expressed concern with the progress on inflation, saying recent lower readings could reverse after tariffs work their way through the economy.

Economic Roundup: The labor market was the focal point of last week’s data calendar. On Friday, the Labor Department reported that nonfarm payrolls increased by 139,000 in May and the unemployment rate remained steady at 4.2 percent. The payroll growth exceeded consensus forecasts, which called for net monthly job gains of 126,000. Earlier in the week, the ADP Institute's employment report showed a 37,000 rise in private payrolls for May following a 60,000 increase in the preceding month, compared with estimates compiled by Bloomberg for a 114,000 gain. Meanwhile, initial jobless claims rose 8,000 to 247,000 in the week ended May 31, the highest level since last October, and well ahead of the consensus forecast for 235,000. Challenger, Gray & Christmas said job cuts reached 93,816 in May, up 47 percent year over year. Lastly, job openings unexpectedly rose in April after hovering near a four-year low the month prior. The data from the U.S. Bureau of Labor Statistics showed 7.39 million jobs open at the end of April, an increase from 7.2 million in March. The report also showed that 5.57 million hires were made during the month, up slightly from the 5.4 million made during March. On the manufacturing front, the ISM Manufacturing PMI in the United States dropped to 48.5 in May, down from 48.7 in April, and below the expected 49.5. This marked the third straight month of decline and the biggest drop since November 2024, showing growing economic uncertainty and ongoing cost pressures, partly due to trade policy uncertainty. Elsewhere, the Institute for Supply Management's U.S. services index fell to 49.9 in May from 51.6 in April, compared with expectations of an increase to 52 in a Bloomberg-compiled survey. The print marks the first sub-50 reading since June 2024 and only the 4th in the 60 months since June 2020.

The Week Ahead: The focal point of this week’s data calendar will be the May consumer price index report on Wednesday. Investors will look to the report to and gauge the impact of tariff policy on prices and ultimately the Fed’s rates path. Other reports of interest include the producer price index and initial jobless claims on Thursday, and the preliminary University of Michigan survey for June on Friday. The report will be closely watched for an update on consumer sentiment, as well as inflation expectations. It will be a quiet week for Fed speeches as Fed members will be subject to the blackout period ahead of the June 17–18 Federal Open Market Committee meeting. On the earnings front, two members of the S&P 500, tech concerns Oracle and Adobe, are expected to release results.

— 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 October 1, 1928.

Wilshire 5000 Total Market Index^SM 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.