Strong Earnings and a Resilient Economy Power S&P 500 to a New High

Performance for Week Ending 5.8.2026:

The Dow Jones Industrial Average (Dow) gained 0.2 percent, the Standard & Poor’s 500 Index (S&P 500) added 2.3 percent, and the Nasdaq Composite Index (Nasdaq) tacked on 4.5 percent for the week ending May 8. Sector breadth was mixed with 6 of the S&P sector groups closing higher and 5 closing lower. The technology sector was the strongest (+7.0 percent), while energy (-5.4 percent) was the weakest.

*See below for Index Definitions

MARKET OBSERVATIONS: 5.4.2026  – 5.8.2026

The S&P 500 finished higher for the sixth straight week as the US-Iran ceasefire continued to hold, earnings season remained supportive, and the macroeconomic backdrop showed little signs of strain from the conflict.

Fed Speak: Minneapolis Fed President Kashkari said the conflict in the Middle East has added uncertainty to the outlook for interest rates, noting that an extended closure of the Strait of Hormuz, could result in a hike in interest rates. Cleveland Fed President Hammack said language in policymakers’ post-meeting statement suggesting the central bank’s next move would be a cut didn’t match her outlook, with Hammack saying “I thought that was a little bit misleading, just given my view of where the economy is.” Her baseline outlook is that interest rates will be on hold for quite some time. St. Louis Fed President Musalem said that inflation has become a bigger concern than the job market, and that it’s possible the central bank could hold interest rates steady “for some time.” Speaking at the Milken conference, Chicago Fed President Goolsbee warned against reflexively lowering interest rates in response to faster productivity growth, as the phenomenon can sometimes drive-up inflation. Goolsbee said the Fed’s reaction to faster productivity growth “depends heavily on whether the productivity growth happens unexpectedly or is anticipated to be coming in the future.” Based on Bloomberg’s World Interest Rate Probability tool, traders see little chance of an interest rate cut between now and year end.

Q1 Earnings Recap: Through Friday May 8, 443 companies in the S&P 500 have released first quarter results, with over 81 percent beating expectations. Aggregate earnings for this group are up 25.3 percent from a year ago, solidly ahead of the 12.4 percent projected at the end of March. Reflecting the solid results, analysts have revised earnings expectations higher and now expect 25.8 percent growth in quarterly results. At the sector level, communication services and consumer discretionary have posted the biggest upside surprises and the strongest growth. According to Bloomberg, analysts expect S&P 500 earnings to grow by 22.3 percent for the full year, and by 14.4 percent in 2027.

Economic Roundup: The health of the labor market was in full focus last week. On Friday, the much-anticipated April payroll report showed nonfarm payroll (NFP) employment remained strong following March’s brisk advance, with the data showing an increase of 115,000 jobs while the unemployment rate remained steady at 4.3 percent. The headline NFP reading easily surpassed consensus forecasts—which called for net monthly job gains of 65,000. Meanwhile, initial jobless claims increased 10k to 200k in the week ending May 2, below the consensus forecast of 205k. Despite the mild uptick, claims have now remained below their year-ago levels for 12 straight weeks. Elsewhere, US companies boosted payrolls in April by the most in over a year, the latest evidence of stabilization in the labor market. Private-sector payrolls rose 109,000 after a revised 61,000 advance in the prior month, according to ADP Research data.

Away from the labor market reading, the Institute for Supply Management's US services index slipped to 53.6 in April from 54.0 in March, slightly shy of expectations for a smaller decrease to a reading of 53.7 in Bloomberg survey. Production and employment rose, but new orders and inventories declined; prices paid held steady. Construction spending rose 0.6 percent in March following two months of decline. Compared to a year earlier, spending was up 1.6 percent in March, recovering from negative growth during much of 2025. Private residential construction increased 1.7 percent, after declining 0.1 percent in February and 4.6 percent in January.

Outlook—The Trend Is Our Friend: While the outlook through the end of the year remains favorable, tactically the parabolic move off the March 30 trough has left the market in an overbought state, a condition that usually precedes a period of consolidation. Based on what we feel remains a supportive macro environment, with a resilient economy, solid earnings growth, and a Fed that is still likely to cut rates at least once later this year, we would view any setbacks in the market as a good buying opportunity.

The Week Ahead: The key data release in the week ahead will be the April Consumer Price Index (CPI) report on Tuesday, with the impact of the Iran conflict in focus. According to Bloomberg data, economists expect the headline measure to rise 0.6 percent month over month, down from a 0.9 percent increase in March. The core reading—which excludes food and energy prices—is expected to rise 0.3 percent from a 0.2 percent gain in March. The Producer Price Index will be reported on Wednesday. Other data points of interest include April retail sales on Thursday and the industrial production report on Friday. In monetary policy, the main event will be the Senate vote on Kevin Warsh’s nomination for Fed Chair on Monday, with Chair Powell’s term set to end Friday. On the geopolitical front, the focus will be on the meeting between President Trump and Chinese President Xi scheduled for May 14-15. Rounding out with earnings, just nine members of the S&P 500 are scheduled to release results, including Cisco Systems and Applied Materials. The Fed speaking calendar includes five presentations scattered throughout 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.