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This week the market, as measured by the S&P 500 Index, had a positive return of 0.43% return, trading at an annualized 11.4% volatility.

The weekly sector performances, as measured by the S&P 500 sector indices were:

SectorIndexReturnReturn over S&PVolatilityCorrelation to S&P 500Risk Adjusted Return
EnergyENE2.56%2.13%7.4%81.8%34.5%
TechnologyTEC1.90%1.47%20.5%81.2%9.3%
MaterialsMAT1.85%1.41%14.1%87.9%13.1%
IndustrialsIND0.83%0.40%17.5%89.6%4.7%
UtilitiesUTL0.82%0.38%3.4%44.4%23.8%
DiscretionaryCDI0.32%-0.11%15.2%95.2%2.1%
HealthcareHEA0.20%-0.23%15.3%87.8%1.3%
TelecomTEL-0.37%-0.81%18.0%31.9%-2.1%
StaplesCST-0.87%-1.31%6.4%87.4%-13.7%
FinancialsFIN-2.35%-2.78%13.1%75.6%-17.9%
S&P 500S&P0.43%0.00%11.4%100.0%3.8%
From July 13, 2012 to July 20, 2012

This week the S&P 500 return was higher than last week's return of positive 0.16%.

SectorIndexReturnReturn over S&PVolatilityCorrelation to S&P 500Risk Adjusted Return
FinancialsFIN1.62%1.46%24.2%96.4%6.7%
UtilitiesUTL1.52%1.36%7.9%76.0%19.1%
HealthcareHEA1.29%1.14%10.7%82.6%12.1%
StaplesCST1.10%0.94%8.0%86.8%13.6%
TelecomTEL0.73%0.58%12.6%90.5%5.8%
EnergyENE0.73%0.57%21.3%83.1%3.4%
DiscretionaryCDI-0.41%-0.56%15.0%93.7%-2.7%
IndustrialsIND-0.92%-1.07%20.3%95.4%-4.5%
MaterialsMAT-1.29%-1.44%19.0%98.3%-6.8%
TechnologyTEC-1.67%-1.82%16.7%98.1%-10.0%
S&P 500S&P0.16%0.00%15.1%100.0%1.0%

The positive contributors changed entirely from last week. The Energy sector is back on top due to increased negative events from the Middle East, but at a very high price of high risk adjusted return. This sector will continue to jump as the news from that part of the world unfolds. The Technology sector was a surprising winner last month, due to better than expected positive earnings. And the Materials sector has finally shown some life as the housing sector might have shown some signs modest recovery. The Industrial and Utilities sectors were slight outperformers over the S&P 500 index. With the Industrial sector improving over the two week period, the Utilities sector is continuing its downward slide.

The worst performing sector was Financials, as financial institutions continue to lag in profitability and negative news from Europe is coming back in focus. The Staples sector is beginning to show signs of weakness, whereas the Discretionary sector, although still negative relative to the S&P 500, is beginning to reflect some signs of increase in consumer spending.

The earnings reporting season is upon us and as the truth will catch up with forecasts, we foresee more negative surprises and more downward adjustments in investor views and expectations. Europe is back upon us with more of the same drama that will potentially drag the market down. The Middle East is heating up so we should expect more hikes in the energy sector. Although the VIX is surprisingly low, it is probably more of investor summer complacency then a true reflection of future investor fears.

Disclosure: I am short SPY.

Additional disclosure: At the time of writing Rockledge had long and short positions in SPY, XLB, XLE, XLF, XLI, XLK, XLP, XLU, XLV, XLY