Stocks fell on Thursday as investors grappled with uncertainty surrounding the upcoming European summit on the debt crisis and sought direction from earnings reports from U.S. companies.

Markets have been subjected to fast and violent swings as investors react to a flood of headlines about the upcoming European Union summit.

The EU has agreed on a sum needed to recapitalize Europe's banks, but the summit planned for this Sunday will not reach a decision on leveraging the euro zone rescue fund, according to German sources.

Progress by EU leaders toward a solution is considered vital for Wall Street stocks to break out of their trading range.

It's a ping-pong game -- people have been burned by reacting to individual news stories only to have them refuted, withdrawn or contradicted, said Stephen Massocca, managing director, Wedbush Morgan in San Francisco.

The Dow Jones industrial average <.DJI> dropped 77.57 points, or 0.67 percent, to 11,427.05. The Standard & Poor's 500 Index <.SPX><.INX> lost 7.75 points, or 0.64 percent, to 1,202.13. The Nasdaq Composite Index <.IXIC> fell 34.87 points, or 1.34 percent, to 2,569.17.

Next week we will get something more definitive but at this point, to react to these individual whispers and news stories has been a fool's game, Massocca said.

Volume was light with about 3.77 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, heading into the afternoon.

The S&P 500 has struggled after reaching the top end of a two-month trading range at around the 1,230-1,250 level.

Investors are closely watching the developing U.S. earnings season. According to Thomson Reuters data, of the 109 companies in the S&P 500 that have reported earnings, 70 percent have topped analysts' expectations.

The focus is starting to be more domestic. Here and there are some questions about the directions of earnings, said Massocca.

Ingersoll Rand Plc posted lower quarterly earnings, and its fourth-quarter profit forecast fell short of some Wall Street estimates, due to depressed housing and consumer markets, sending shares down 8 percent to $27.36.

Polycom Inc
plunged 27.3 percent to $15.88 and weighed on the Nasdaq after the videoconferencing company reported quarterly revenue well below market expectations. It said sales to large companies slowed and forecast weak fourth-quarter revenue. The NYSEArca networking index <.NWX> lost 4.1 percent.

U.S. economic data included factory activity in the U.S. Mid-Atlantic region, which rebounded in October, and jobless claims, which fell last week. But other data showed a drop in sales of existing-homes last month and only a small rise in a gauge of future growth.

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)