U.S. stocks dipped more than 1 percent on Thursday after the latest jobs and manufacturing data sparked worries about the pace of economic recovery, with technology shares leading losses.

The September manufacturing data, with worse-than-expected jobless claims released before the bell, overshadowed more positive reports on construction spending and pending home sales.

The Institute of Supply Management's manufacturing reading fell to 52.6, lower than economists' forecast of 54.0 and August's 52.9.

Wall Street got smacked, and I think that largely came as result of the ISM headline, said Ronald Simpson, managing director at Action Economics in Tampa, Florida. It was pretty close to expectations, but if you're looking at recovery, the number really didn't do the trick.

Microsoft Corp fell 2.7 percent to $25.03 after Goldman Sachs removed the stock from its Americas Conviction Buy list, citing the possibility of another weak quarter for the world's No. 1 software maker.

Cisco Systems Inc shares fell 1.3 percent to $23.24 after it offered to buy Norwegian video conferencing company Tandberg for $3 billion in cash.

The Dow Jones industrial average <.DJI> was down 120.54 points, or 1.24 percent, at 9,591.74. The Standard & Poor's 500 Index <.SPX> was down 11.54 points, or 1.09 percent, at 1,045.54. The Nasdaq Composite Index <.IXIC> was down 35.15 points, or 1.66 percent, at 2,087.27.

In other deal talks, Penske Automotive Group Inc
shares tumbled 13 percent to $16.65 after the company said it ended talks with General Motors Co to buy the Saturn brand.

Comcast Corp fell 6 percent to $16.07 after it denied it had a deal to buy media conglomerate NBC Universal. But the largest U.S. cable service provider stopped short of quashing widespread speculation that it was interested in the entertainment company, jointly owned by General Electric Co and Vivendi. GE shares were off 1.5 percent at $16.17.

Bank of America Corp shares slipped 0.7 percent to $16.82 after Chief Executive Ken Lewis said he was retiring after months of being dogged by a series of government investigations into the company's acquisition of Merrill Lynch. The company did not name a successor.

Rising shares included wine and spirits maker Constellation Brands Inc , up 3 percent to $15.62 after reporting a quarterly profit.

The S&P 500, which notched its second straight quarterly advance of 15 percent in the third quarter, is now up about 54 percent from its 12-year closing low in March.

(Reporting by Angela Moon; Editing by Padraic Cassidy)