By Sara Sjolin, MarketWatch

Oil slides into bear territory

Stocks were on track to finish the month with a whimper as data showing the U.S. economy grew at a sluggish pace in the second quarter and mixed earnings weighed on investor sentiment Friday.

A renewed selloff in oil prices, that left the commodity in the bear market territory, defined as the 20% or more drop from the recent peak, hit energy companies.

The tepid 1.2% annual growth rate was due to a large decline in business investment (http://www.marketwatch.com/story/second-quarter-gdp-rises-just-12-well-below-forecast-2016-07-29), according to the Commerce Department. Meanwhile, first-quarter growth was also revised down to a 0.8% annual rate from the prior estimate of a 1.1% gain.

The S&P 500 index lost 2 points, or 0.1%, to trade at 2,168, with energy and materials leading the losses, down 1.4% and 0.6% respectively. The Dow Jones Industrial Average fell 29 points, or 0.2%, to 18,428. Both indexes are looking at monthly gains of about 3%, though they are on track to finish the week modestly lower.

The Nasdaq Composite was up 5 points, or 0.1%, to 5,160. The tech-heavy index was set for an 6% advance for the month and a 1% gain for the week.

Economic news: The first estimate of second-quarter gross domestic product (http://www.marketwatch.com/story/us-second-quarter-gdp-increases-at-sluggish-12-annual-rate-2016-07-29)came in at a sluggish 1.2% annual rate, far below the expectations of 2.6% pace. Lackluster growth could derail the Federal Reserve's intentions to raise interest rates at a gradual pace.

Second-quarter business inventories contracted for the first time since 2011. Meanwhile, the employment cost index rose 0.6%.

Joseph Lake, economist at The Economist Intelligence Unit, noted even as the headline numbers looked weak, the details show the U.S. economy is healthier than it appears.

"Private consumption grew by a whopping 4.2% in the second quarter, and given the importance of the American consumer to the world right now, that is a big relief," Lake wrote in emailed comments.

"The economy is chugging along in a fairly steady recovery, creating plenty of jobs, but failing to quicken to a pace that would leave the Fed feeling comfortable enough to remove more of its support," Lake said, adding that he does not expect rate increases this year.

Earlier, disappointment over Bank of Japan's latest easing action also weighed on sentiment.

"A moderate stimulus package from the Bank of Japan overnight got the final trading day of the week off to a disappointing start, leaving traders to look towards the large number of earnings and data releases today to pick them up again," said Craig Erlam, senior market analyst at Oanda, in a note.

The BOJ made no changes to interest rates (http://www.marketwatch.com/story/bank-of-japan-oks-more-stimulus-keeps-rate-steady-2016-07-29) or to its bond-buying program. However, the central bank did increase its purchase of exchange-traded funds to Yen6 trillion ($57 billion) annually from Yen3.3 trillion previously.

See:

Federal Reserve speakers: San Francisco Fed President John Williams was scheduled to speak Friday morning at an event in Boston.

Dallas Fed President Rob Kaplan is scheduled to speak at the Independent Bankers Association of New Mexico at 1 p.m. Eastern.

Full speed on earnings: Cigna Corp.(CI) kicked off another busy day of corporate results, sliding 4.3% after the health care insurer significantly missed on earnings.

Merck & Co. Inc.(MRK) climbed 1% following an earnings beat (http://www.marketwatch.com/story/mercks-profit-and-revenue-rise-above-expectations-2016-07-29).

AbbVie Inc.(ABBV) gained 1.8% after raising its full-year adjusted earnings outlook.

Xerox Corp.'s(XRX) shares rose 2.9% after profit rose more than expected (http://www.marketwatch.com/story/xerox-profit-rises-beats-expectations-2016-07-29).

Exxon Mobil Corp.(XOM) fell 3.8% after the company's second-quarter profit and revenue fell short of analyst estimates (http://www.marketwatch.com/story/exxon-mobil-shares-fall-26-premarket-after-company-misses-on-profit-and-revenue-2016-07-29).

Chevron Corp.(CVX) slid 1.6% after the company swung to a loss for the second quarter as it booked impairment and other charges.

United Parcel Service Inc.(UPS) shares fell 1.8% after the shipping company reported earnings in line with expectations.

Shares of Alphabet Inc.(GOOGL) rose 3.6% after the Google-parent late Thursday reported earnings and revenue well above Wall Street expectations (http://www.marketwatch.com/story/googles-alphabet-shares-hit-intraday-record-high-after-earnings-2016-07-28).

Amazon.com Inc. (AMZN) also reported earnings that beat estimates (http://www.marketwatch.com/story/amazon-posts-huge-quarterly-beat-but-very-wide-operating-income-outlook-2016-07-28) late Thursday, sending shares 0.6% higher.

Shares of Western Digital Corp.(WDC) dropped 7.6% after the computer storage company late Thursday swung to a loss in the latest quarter (http://www.marketwatch.com/story/western-digital-posts-a-loss-but-tops-forecasts-2016-07-28-16485455).

Expedia Inc.(EXPE) slumped 4.2% after reporting earnings late Thursday.

Other markets: European markets marched higher (http://www.marketwatch.com/story/european-stocks-advance-as-bank-shares-move-higher-ahead-of-stress-tests-2016-07-29), with banks leading the charge north ahead of stress-test results from the European Banking Authority (http://www.marketwatch.com/story/europe-stress-test-results-to-put-spotlight-on-italys-troubled-banks-2016-07-28), due after the market closes. Japan's Nikkei 225 index initially declined, but ended the day 0.6% higher (http://www.marketwatch.com/story/asian-markets-cautious-as-investors-await-word-from-bank-of-japan-2016-07-28).

Oil slumped (http://www.marketwatch.com/story/crude-oil-enters-bear-market-after-losing-41-handle-2016-07-29), with the U.S. benchmark sliding into bear territory and losing its grip on the $41 handle. Gold inched 0.5% higher.

The ICE dollar index fell 0.9% to 95.821.

(END) Dow Jones Newswires

July 29, 2016 09:57 ET (13:57 GMT)

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