Stocks slid on Thursday, extending losses after executives with Cisco Systems Inc and Kohl's Corp made cautious comments about the strength of the economic recovery.
Following last week's plunge, stocks had scored their best three-day run in 10 months on Wednesday as fears of an economic meltdown in Europe eased. But the mood remained downbeat, with investors unwilling to take big risks.
A cautious tone from Cisco Systems' chief executive, who warned about a weak U.S. labor market, underscored the listless mood and helped push Cisco's stock down almost 5 percent. The stock was the biggest percentage drag on the Dow and the most actively traded name on the Nasdaq.
In addition, a report showing the number of U.S. workers filing for jobless benefits fell only slightly last week, suggesting the unemployment rate will remain elevated even as recovery in the labor market becomes entrenched.
Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco, said investors were starting to focus on the U.S. domestic environment. But he added that Europe's debt problems were still an overhang on the market.
That there's still this looming problem in Europe that's going to take time is the negative, the question is how big of a negative is that really going to be, he said.
The Dow Jones industrial average <.DJI> dropped 96.28 points, or 0.89 percent, to 10,800.63. The Standard & Poor's 500 Index <.SPX> fell 11.90 points, or 1.02 percent, to 1,159.77. The Nasdaq Composite Index <.IXIC> lost 28.38 points, or 1.17 percent, to 2,396.64.
Shares of moderately priced U.S. department store chain Kohl's Corp lost 6 percent to $53.73 after the company forecast second-quarter and full-year profits that fell short of Wall Street's expectations. Kohl's executives said they preferred to be conservative in their forecasts, noting they were not yet ready to show too much optimism.
An S&P index of retailers' shares <.RLX> lost 3.2 percent.
An index of home builders' shares dropped 4.2 percent, while a semiconductors' index fell 3 percent.
In spite of Thursday's late afternoon slide, the S&P 500 is still up 4.4 percent from last Friday's close -- marking its biggest three-day run since July 2009. That was after falling nearly 7 percent the week before.
Helping cushion the Dow's decline was U.S. aluminum producer Alcoa Inc, whose stock rose 2.9 percent to $12.82 on expectations the metal's price could rise as a result of Chinese electricity price increases. Century Aluminum rose 5.4 percent to $12.72.
Tech stocks stayed in focus after German software company SAP AG agreed to buy smaller U.S. rival Sybase Inc for $5.8 billion. Sybase jumped 14.4 percent to $64.22, while the U.S.-listed shares of SAP fell 0.8 percent to $44.55.
This M&A activity is encouraging because it's being done on the merit of the deal, not simply because they have excess borrowing power, said Rob Stein, managing partner at Astor Asset Management in Chicago.
On the earnings front, Whole Foods Market Inc jumped 6 percent to $42.67, boosting consumer stocks after its quarterly profit topped estimates and it raised its full-year forecasts.
U.S.-listed shares of Sony Corp fell 5.1 percent to $31.56 after it forecast a full-year operating profit that was below expectations.
Morgan Stanley rose 0.7 percent to $27.99 after FBR Capital Markets upgraded the stock to outperform, expecting it to gain market shares in its institutional trading division.
(Reporting by Edward Krudy; Editing by Jan Paschal)