Post Fourth of July Fireworks in the S&P 500

Well, you can't say that we didn't warn you that trouble lay ahead!

But, that's just taking credit for being lucky. We really don't know which direction the S&P 500 will turn. All we know is that it's a good thing that Fannie Mae (FNM, down 13.8%) and Freddie Mac (FRE, down 22% today) aren't bigger parts of the S&P 500!

Speaking of which, the index actually closed up today at a value of 1253.59, but given where the index sits, that likely doesn't sit well with you. The chart below reveals where we stand:

Now, here's where we need to note an important difference. The trend through June 2008 has changed from what we had previously shown, as S&P has updated its data to show that dividends per share for the second quarter of 2008 would be $7.10, some 26 cents below where we had previously projected it.

That's enough of a change to switch the post-January breakdown in order from slightly positive to slightly negative. That of course presumes that the market begins to recover from its current levels, which is not necessarily a sure bet.

But we're at a place where it might be interesting to place a bet. The market has been breaking down in anticipation of a number of large financial companies taking steps to cut their dividend payouts to shareholders now that the second quarter of 2008 has ended. You'll find the companies most at risk of whacking their dividends here, ranked according to the likelihood that they will, or rather, by their current dividend yield!

Looking over just the Top 10 at today's writing, seven are banks (RF, BAC, CMA, WB, MI, STI, HBAN), one is a home lender (ACAS), one is a debt holder (Federal Home Loan Mortgage, part of today's fun action with Fannie Mae and Freddie Mac), and then there's General Motors (GM).

The silver lining is that most of the market carnage is limited to Financials, due to the continuing sub-prime lending fallout, and companies negatively impacted by sustained high gas prices, namely automotive companies and airlines (the latter where bankruptcy *is* part of the basic business plan!)

So here we are, waiting to find out the two things investors need to know before they'll be willing to up their investments: how much will these distressed companies cut their dividends and when will they announce their plans to do so?

If you're of a "the glass is already half empty" frame of mind, and you're willing to ride out the volatility headed this way, now might be a pretty good time to put money to work for you in the market.

But if the distress in the stock market spreads beyond where it is today, you might find yourself opting to keep your money on the sidelines.

So our final question is "do you feel lucky?"