Stocks declined on Thursday as an unexpected rise in weekly jobless claims and a disappointing forecast from Cisco Systems fueled worries about the economic recovery.

Shares of computer networking company Cisco fell 9.6 percent to $21.44 and was the biggest drag on both the Dow and Nasdaq, a day after cautious comments from its chief executive and a current-quarter revenue forecast below estimates. At least two brokerages cut their ratings on the stock.

On Wednesday, all three major indexes recorded their worst percentage declines in more than a month, erasing gains for the year in the aftermath of a gloomier outlook from the U.S. Federal Reserve.

Cisco CEO John Chambers warned of unusual uncertainty in the economy, surprising some investors who expected more reassuring comments. That was followed by data on Thursday showing the number of people filing new claims for unemployment insurance in the latest week rose to its highest level in nearly six months.

We're at a crucial point here. People no longer have equity in their homes, interest they can earn on fixed income is way down and if you start getting the stock market to drop, too...the economy could go into a real shock, said Edward Hemmelgarn, founder, president, and chief investment officer of Shaker Investments in Cleveland.

The PHLX semiconductor index <.SOX> hit a session low of 318.91, its lowest level in seven months, breaking through the lower end of the range of 324 to 377 it had been at since early May. At midday, the SOX was down almost 1 percent at 326.83, following a drop of more than 4 percent on Wednesday.

The Dow Jones industrial average <.DJI> dropped 38.52 points, or 0.37 percent, to 10,340.31. The Standard & Poor's 500 Index <.SPX> slipped 4.40 points, or 0.40 percent, to 1,085.07. The Nasdaq Composite Index <.IXIC> slid 15.66 points, or 0.71 percent, to 2,193.00.

The S&P 500 fell below its 50-day moving average of 1,088, a key technical support. A break below technical levels could exacerbate a sell-off.

Technicians also are watching to see if the SOX breaks its 324 support level.

This would be very negative for the U.S. broad market and would suggest that a much bigger decline is coming, John J. Kosar, director of research at Asbury Research LLC in Chicago, said in a note.

Among other stocks declining, Kohl's Corp fell 3.3 percent to $46.19 after the moderately priced U.S. retail chain reported better-than-expected earnings, but its forecast fell short of expectations.

Meanwhile, General Motors Co posted its biggest quarterly profit in six years on Thursday, a day ahead of its expected filing for an initial public offering.

(Reporting by Caroline Valetkevitch; Additional reporting by Angela Moon and Rodrigo Campos; Editing by Jan Paschal)