Stocks fell on Thursday as rising bond yields fueled concern about higher borrowing costs, offsetting earlier optimism about a $20 billion buyout of Hilton Hotels Corp.
General Motors Corp. dragged on the Dow. The largest U.S. automaker's shares fell in reaction to a steeper-than-expected drop in U.S. sales in June. On Thursday, Bear Stearns cut its recommendation on General Motors' stock.
Yields rose after stronger-than-expected data on the jobs market gave a boost to forecasts for Friday's non-farm payrolls report. The yield on the benchmark 10-year Treasury note rose to 5.10 percent from 5.05 percent late on Tuesday.
U.S. crude rose 59 cents to $72 a barrel, adding to concerns.
Ten-year yields are going up today and oil is rising, said Ryan Detrick, equities analyst at Schaeffer's Investment Research in Cincinnati.
The Dow Jones industrial average was down 42.52 points, or 0.31 percent, at 13,534.78. The Standard & Poor's 500 Index was down 1.23 points, or 0.08 percent, at 1,523.64. The Nasdaq Composite Index was down 1.42 points, or 0.05 percent, at 2,643.53.
Shares of Hilton rose 26.7 percent to $45.66 after U.S. private equity firm Blackstone Group on Tuesday agreed to buy the company for about $20 billion plus debt.
In economic news, the number of initial claims for U.S. jobless aid filed last week rose to a level higher than economists had forecast.
And U.S. private employers likely added 150,000 jobs in June, a report by ADP Employer Services, a private employment service, said. Economists surveyed by Reuters had expected the ADP report to show 100,000 new private sector jobs in June.
(Additional reporting by Rachel Breitman)