MarketView for July 12

Summary

The major equity indexes were lower again on Thursday, yielding the sixth day of losses as stocks were once again pummeled, this time by warnings in the technology sector, while a rally in Procter & Gamble helped the Dow Jones Industrial Average reduce its loss. Shares of Procter & Gamble rose 3.7 percent to $63.70 after the Street rippled with rumors that William Ackman appears to be building a stake in the company. Yet, despite the support, the Dow still ended lower for a sixth day.

Tech shares remained under pressure with the S&P technology sector index down 3.5 percent for the month so far. Infosys Ltd became the latest big tech company to warn of sluggish sales, stating that global economic uncertainty was hitting technology spending. Infosys slid 11.2 percent to $38.75, after earlier dropping to an all-time low of $38.12. Profit warnings from companies such as Advanced Micro Devices have hurt the sector in recent days.

Meanwhile, all three major U.S. stock indexes recovered from their lows of the day, with the S&P 500 bouncing off its 50-day moving average at 1,334 and the Dow briefly trading higher after hitting technical support at 12,500.

Merck also bolstered the Dow. Merck's stock rose 4.1 percent to $42.91 after a pivotal trial of Merck's experimental osteoporosis drug odanacatib has shown that it reduces the risk of fracture. Nonetheless, the Dow has lost 2.9 percent since its close on July 3.

Overall market sentiment was weak, especially after the lack of any monetary easing by the Bank of Japan on Thursday, and few clues on Wednesday in the minutes from the Federal Reserve's June policy meeting. The lack of policy moves suggested major central banks were still cautious about the need for further easing.

On the earnings front, Bank of America Merrill Lynch Global Research lowered its forecast on the S&P 500's 2012 earnings per share to $102 from $103.50, and for 2013, to $109 from $110.50. The forecasts were cut "to reflect the impact of lower commodity prices and slower global growth on corporate profits," BofA Merrill Lynch Global Research analysts wrote in a note.

Marriott International reported a higher quarterly profit after Wednesday's close, but cut its fee revenue forecast due to weakness in some international markets. Its share price fell 6.4 percent to $35.58.

Data on the economy showed some promising signs, however. Initial claims for state unemployment benefits in the United States dropped to the lowest in four years.

Other economic data indicated that June import prices fell 2.7 percent, the most in more than three years, due to a plunge in the cost of imported oil, further icing inflation pressures.

Volume was a bit lighter than average. About 6.46 billion shares changed hands on the three major exchanges, as compared with the year-to-date daily average of 6.85 billion shares.

Decline in Jobless Claims Unexpected

The number of new claims for jobless benefits fell to a four-year low last week but an unusual pattern for summer factory shutdowns suggested layoffs might pick up again in coming weeks. The Labor Department said new claims for state unemployment benefits dropped 26,000 last week to 350,000. That was the lowest since March 2008, the early days of the last recession.

A Labor Department official said the data, which is adjusted to account for normal seasonal swings, may have been skewed because some automakers postponed annual closures for retooling. That means the temporary layoffs for retooling may have simply been postponed to allow manufacturers to keep up with sturdy demand, which in itself is a good sign for the economy.

The four-week moving average for new claims, a better measure of labor market trends, fell 9,750 to 376,500. That is a significant drop, although the average is only at its lowest point since May.

Hiring by U.S. companies slowed dramatically in the second quarter as employers grew worried about a sagging global economy hurt by Europe's snowballing debt crisis. Many employers are also concerned over governmental plans to cut spending and let tax cuts expire next year, a jolt that could send the economy into recession.

Famed U.S. investor Warren Buffett said the economy has been about flat in recent months. "It's not heading downward but it's not growing at the rate that it was earlier," he told CNBC.

One relative bright spot of late has been the housing sector. Data analysis firm CoreLogic said there were fewer U.S. homeowners in the first quarter who owed more on their mortgages than their homes were worth. Yet, at the same time another data firm, RealtyTrac, said banks started foreclosure proceedings at a higher pace in June for the second month in a row.

In a report that highlighted weakness in the global economy, the Labor Department said import prices fell 2.7 percent in June, the most in more than three years. Most of the drop was due to a plunge in the cost of imported oil.

Oil prices have fallen as economic growth has cooled across Europe and in China. In a sign of global economic weakness, Indian IT heavyweight Infosys Ltd made a deeper-than-expected cut to its sales forecast. While a slowing global economy is bad for the United States - many economists think U.S. growth also cooled in the second quarter - lower oil prices provide something of a silver lining.

For one, slowing inflation could give the U.S. Federal Reserve more scope to ease monetary policy. Minutes from the central bank's June meeting, released on Wednesday, showed the Fed is open to buying more Treasury bonds to stimulate growth if necessary.

Also, lowering costs at the pump will leave Americans with more money to spend on other things, boosting the economy. The data on import prices showed the cost of imported petroleum plunged 10.5 percent, the sharpest drop since December 2008.