MarketView for August 23

Summary

The major equity indexes were down across the board on Thursday as expectations for quick stimulus action from the Federal Reserve faded and Chinese and euro zone data pointed to a stalling global economy. Each of the 10 major S&P sectors finished in negative territory, with the economically sensitive materials sector being the worst performer, down 1.7 percent.

The S&P 500 is up nearly 10 percent since June 1 after hitting a four-year high earlier this week. However, recent losses have put the benchmark S&P 500 index on pace for its first weekly drop in seven as the rally appeared to be losing steam.

A not unexpected slump in Hewlett-Packard’s shares weighed on the technology sector, but the S&P 500 index managed to remain above the 1,400 level, which is seen as a positive sign.

Minutes published from the latest Federal Reserve meeting indicated the central bank might be ready for another round of stimulus for the economy, supporting equities on Wednesday. Investors speculated another round of quantitative easing by the Fed was a possibility.

However, St. Louis Fed President James Bullard, a non-voting member of the Federal Open Market Committee, said on CNBC that recent data  has been somewhat better since the July 31-August 1 Fed meeting and the minutes were "a bit stale.

Fed Chairman Ben Bernanke in the past has used annual conferences in Jackson Hole, Wyoming, to signal publicly the Fed's intentions, but investors this time may be disappointed. This year's Jackson Hole conference takes place at the end of the month.

World business surveys painted a picture of economic malaise from Beijing to Berlin. The HSBC Flash China manufacturing purchasing managers index (PMI) - a preliminary reading that provides an early peek at data for August - fell this month to its lowest level since November.

A German business survey showed orders from abroad for the country's goods, a mainstay of its economic strength, fell at the fastest rate in more than three years. The number of Americans filing new claims for jobless benefits unexpectedly rose last week while domestic manufacturing improved only slightly in August, worrisome signs for an economy struggling to create enough jobs.

Sales of new single family homes rose in July, matching April's two-year high.

The reports could be interpreted as evidence the economy is not in need of further stimulus from the Fed.

HP shares fell 8.1 percent to $17.65 as the worst performer on the Dow and Dell extended recent losses, slipping 3.8 percent at $11.24. Big Lots shares tumbled 20.8 percent to $30.76 as the biggest percentage decliner on the S&P 500 after the retailer reported a lower-than-expected quarterly profit and cut its full-year adjusted earnings forecast.

Volume was light with about 5.23 billion shares changing hands on the three major equity exchanges, a number that was below the daily average of 6.62 billion shares.