Stocks fell on Thursday as slowing regional factory activity and jobless claims underscored worries about the pace of the economic recovery.
Shares of manufacturers fell, including 3M Co , which was down 0.6 percent at $80.43, while the consumer discretionary sector also dragged the market lower. The S&P retail index <.RLX> declined 1.5 percent.
The Philadelphia Federal Reserve Bank said its June business activity index showed its slowest growth in 10 months, while the number of people filing for unemployment insurance unexpectedly increased in the latest week.
The data comes at an anxious time for investors who worry that government austerity measures in Europe and tighter money policies in Asia could slow the world's economic recovery.
The economy continues to take three steps forward and two steps back, and this week thoroughly has been driven by the two steps back, said David Katz, chief investment officer at Matrix Asset Advisors.
The Dow Jones industrial average <.DJI> dropped 29.78 points, or 0.29 percent, to 10,379.68. The Standard & Poor's 500 Index <.SPX> slipped 2.84 points, or 0.25 percent, to 1,111.77. The Nasdaq Composite Index <.IXIC> fell 3.66 points, or 0.16 percent, to 2,302.27.
The S&P 500 hovered around its 200-day moving average at 1,109.11 after having broken past that level this week for the first time in a month. A sustained move above the level would be seen as bullish by chart-minded investors.
Katz said that despite the stuttering economy, signs from corporations continued to be good, adding he expected earnings to drive stocks.
An example of good corporate news was Apple Inc , whose shares touched a lifetime high at $272.90 a day after the company said it sold more than 600,000 units of its new iPhone. Its shares were last up 1.7 percent at $271.76.
There were some signs of recovery in companies involved in the Gulf of Mexico oil spill.
U.S.-traded shares of Transocean , up 5.8 percent at $49.73, were on track to close above their 14-day moving average for the first time since April 26.
The daily moving average convergence-divergence, or MACD, of the U.S. shares of BP Plc generated a 'sell' signal on April 22, and it has not been able to reverse that trend.
BP was nearing another bullish signal, nonetheless, as the relative strength index, at 32.4, was close to the 30 level that indicates the shares could be oversold. BP shares fell 0.9 percent to $31.56.
Home builder stocks lost ground a day after luxury home builder Toll Brothers Inc said a decline in consumer confidence has led to fewer people looking to buy a home. Its shares declined 3.9 percent to $18.04 while KB Home fell 2.6 percent to $12.60.
Investors are also worried that the expiration of a home buyer tax credit could hit the sector. The Morgan Stanley housing index <.HGX> dropped 2.4 percent.
Fred Dickson, chief market strategist, D.A. Davidson & Co. Lake Oswego, said volatility could increase because of options and futures expirations on Thursday and on Friday.
The quadruple witching period, as it is called, refers to the quarterly settlement and expiration of four different types of June equity futures and options contracts.
(Reporting by Edward Krudy; Editing by Kenneth Barry)