MarketView for August 8

Summary

The Standard & Poor's 500 managed to squeeze out a fourth day of gains on Wednesday, ending above 1,400 in another thinly traded session. Expectations for stimulus from the European Central Bank and the Fed triggered the recent gains, but there was apparently little reason to keep pushing stocks higher after driving the market to three-month highs.

The three major equity indexes opened lower but recovered at midday, led by consumer staples and health care. Both are defensive plays, an indication that investors are keeping their enthusiasm in check. The hope for central bank action comes amid projections of poor growth for coming quarters and lackluster demand worldwide.

In a sign of that weakening demand, McDonald's fell 1.7 percent to $87.53 after reporting flat same-store sales in July, the worst performance for the Dow component in more than nine years.

The Bank of England gave little indication that it would rush to pour in further stimulus even as it sharply cut its forecast for medium-term economic growth in Britain. France's central bank forecast a contraction in growth going into the third quarter, citing weak demand from the periphery and Britain.

Spanish benchmark 10-year debt yields briefly rose above 7 percent, underscoring the cautious tone from investors recently disappointed by lack of coordination from European officials in their efforts to reignite the economy. Markets are pricing in the idea that it may take time until Spain asks for a bailout, which would open the door for ECB intervention.

Wednesday's market moves appeared to be largely driven by algorithmic trading, signaling a lack of conviction in any one direction. Volume was light, with about 5.72 billion shares changing hands on the three major equity exchanges, a number that was well below last year's daily average of 7.84 billion shares.

The consumer discretionary sector was the day's weakest, falling 0.4 percent as fashion juggernaut Ralph Lauren and travel websites Priceline and Orbitz both forecast slowing demand due to the global slowdown. Ralph Lauren shares fell 1.1 percent to $151.39. Orbitz was down 25.5 percent to close at $3.47 and Priceline fell 17.3 percent, ending the day at $562.32.

Shares of Dean Foods, which is spinning off a unit, rose 40.6 percent to $17.46 a day after posting a stronger-than-expected quarterly earnings.

The stock of MEMC Electronic Materials was up nearly 11 percent to $2.28 after the silicon wafer maker reported a surprising quarterly profit on an adjusted basis.

Williams Partners shares fell 4.2 percent to $50.85 after the energy infrastructure company announced the offering of 8.5 million common units.

Productivity Rises

According to a report released by the Labor Department on Wednesday morning, nonfarm productivity rose more than expected in the second quarter as companies expanded output but only modestly increased the hours worked by their employees. Productivity climbed at a faster-than-expected 1.6 percent annual rate between April and June.

In the same report, the government said productivity rose 0.7 percent last year, more than the initially estimated advance of 0.4 percent. In another revision, productivity declined less than initially thought in the first quarter of 2012, the Labor Department said.

Output increased at a 2.0 percent rate during the second quarter, but hours worked only rose at a 0.4 percent rate, the Labor Department said.

Using several years of recently revised data on economic growth, the government also said productivity did not rise quite as much as initially thought in 2010. Employers slashed payrolls during the 2007-09 recession, helping fuel a temporary spike in productivity. The increase faded last year. The Labor Department report also showed unit labor costs climbing 1.7 percent during the period, a faster pace than the 0.6 percent gain expected.