Wall St down on darkening US economic news

Trader Gregory Rowe, left, and specialist Peter Giacchi work on the floor of the New York Stock Exchange. Photo / AP

Wall Street extended declines amid concern that the economic outlook is darkening, which will be reflected in corporate earnings.

In the US, new claims for state unemployment benefits fell 26,000 last week to 350,000, according to Labor Department data. While that was the lowest since March 2008, the drop reflected volatility of claims during the annual auto-plant retooling period.

The four-week moving average for new claims dropped 9,750 to 376,500.

"While today's report does not signal a meaningful recovery in the labour market, it may point to continued strength in the auto sector," Jeffrey Greenberg, an economist at Nomura in New York, told Reuters.

It's clear that the American economic recovery has lost steam. "It's not heading downward but it's not growing at the rate that it was earlier," Berkshire Hathaway's Warren Buffett told CNBC today.

China, the world's second-largest economy, is set to release its second-quarter gross domestic product data, which is expected to show more signs of slowing.

The nation's economic expansion fell below 8 per cent for the first time since 2009, according to the median estimate in a Bloomberg News survey.

That's bad news for commodities.

"Conditions [in China] are much weaker than is apparent at first glance when looking at GDP figures," Daniel Brebner, analyst at Deutsche Bank, told Reuters. "If you look at steel and thermal coal prices in Asia they are coming down sharply and that bodes poorly for things like copper so I do expect prices to be under some pressure."

Bank of America strategists slashed their earnings forecasts for S&P 500 companies by 1.4 per cent for this year and next year, citing falling commodity prices and slower global growth prospects. The bank's strategists now project earnings of US$102 per share for 2012 and US$109 for 2013, Bloomberg reported, citing a note to clients today.

Investors will closely eye results by JPMorgan and Wells Fargo, both due on Friday.

Bucking the downward trend on Wall Street, shares of Procter & Gamble rose. Activist investor William Ackman appears ready to shake up management at yet another major company, building a stake in the iconic US household products company, Reuters reported, citing a person familiar with the matter.

Ackman's Pershing Square has been building a position in P&G for the last few weeks and may grow its stake further, the source who was not permitted to speak publicly told Reuters.

Also strengthening is the Dollar Index. And JPMorgan Chase technical analyst Niall O'Connor forecast the index may extend its climb beyond a two-year high after rising above a key technical level.

The gauge closed yesterday at 83.568, breaking through a resistance level at 83.55 as it exceeded its June 1 high, O'Connor wrote today in a client note, and told Bloomberg it now may rise to 84.93