Stocks slipped on Thursday after data showed continued softness in the labor market but a shrinking trade gap, ahead of a speech by U.S. President Barack Obama detailing his plan for jobs growth.

Applications for unemployment benefits rose to 414,000 in the week ended September 3 from an upwardly revised 412,000 in the prior week, the Labor Department said.

A separate report showed the trade deficit narrowed considerably in July, a positive signal for growth in the third quarter after a sluggish first half.

The trade balance was better than expected despite worse jobless claims, so that could move up (gross domestic product) estimates, and that is why we probably didn't go down more than what we should have on the number, said Sam Ginzburg, head of capital markets at First New York in New York.

The Dow Jones industrial average <.DJI> dropped 27.81 points, or 0.24 percent, to 11,387.05. The Standard & Poor's 500 Index <.SPX> fell 5.46 points, or 0.46 percent, to 1,193.16. The Nasdaq Composite Index <.IXIC> shed 8.18 points, or 0.32 percent, to 2,540.76.

On the heels of the jobless data and last Friday's payrolls report showing no jobs were created in August, Obama is expected to propose tax cuts for the middle class and businesses and new spending to repair roads, bridges and other infrastructure.

Federal Reserve Chairman Ben Bernanke will deliver a speech on the U.S. economic outlook to the Economic Club of Minnesota at 1:30 p.m. EDT (1730 GMT), but he is unlikely to outline new measures to boost the economy.

I want to hear what Bernanke has to say, I want to hear what Obama has to say, which in turn is going to make Friday, for our market, a very interesting day, said Ginzburg.

The European Central Bank signaled that its interest rate rise cycle had been halted, saying euro zone inflation risks were no longer skewed to the upside and economic growth would be slow at best. European stocks were little changed.

Caliper Life Sciences Inc surged 41.4 percent to $10.43 after a deal to be bought by PerkinElmer Inc

. PerkinElmer fell 3.2 percent to $21.35.

(Reporting by Chuck Mikolajczak; editing by Jeffrey Benkoe)