U.S. equities fell on Thursday, with consumer discretionary lagging, as investors digested a series of economic data, while the Dow Jones industrial average failed to reach a key psychological level.
"Dow 20,000, we believe that's a major psychological wall for investors," said Jeff Kravetz, regional investment strategist at the Private Client Reserve at U.S. Bank. "It's going to require a major catalyst for investors to go over that wall."
The Dow dropped about 20 points, with Wal-Mart contributing the most losses, pulling it about 80 points away from 20,000. On Wednesday, the index closed about 60 points away from the level.
"What we're seeing here is a tired market," said Peter Cardillo, chief market economist at First Standard Financial. "I think it's mostly a lack of volume. A lot of traders and institutions have already made their moves" for the year.
The S&P 500 slipped 0.2 percent, with consumer discretionary falling 1 percent. The Nasdaq composite dropped around 0.4 percent.
"The fundamentals are pointing in the right direction," said John Traynor, CIO at People's United Bank. "The Trump rally ... has gotten ahead of itself."
Stocks have risen sharply since President-elect Donald Trump won the presidency, as optimism has flooded the market amid potential tax cuts and deregulation of certain sectors.
"We think the tend is correct, but the magnitude of this Trump rally is what surprised us," Traynor said.
Major indexes since Nov. 8
That said, David Lafferty, chief market strategist at Natixis Global Asset Management, said high equity valuations and concerns about how the Trump administration might take a tougher stance on trade were factors weighing on stocks Thursday. "The hope was … all this tough talk on trade would fade in to the background. Bringing in someone like Navarro doesn't reassure us," he said.
Trump doubled down on his tough stance on China on Wednesday after naming Peter Navarro, a well-known China critic, to lead the newly created White House National Trade Council.
On the data front, Initial jobless claims jumped to 275,000 last week, with economists polled by Reuters expecting them to total 256,000. Durable goods orders for November fell 4.6 percent last month, less than expected.
Meanwhile, the final read on third-quarter U.S. GDP came in at 3.5 percent, above the expected 3.2 percent.
The better-than-expected GDP print "sets a higher bar for Q4 but growth for the full year will still be around 2%. With days away from finishing Q4, this figure is old news and of course also comes pre election and pre jump in interest rates," said Peter Boockvar, chief market analyst, in a note to clients.
Personal income remained flat in November while consumer spending increased modestly.
In Europe, stocks closed mostly lower amid concerns surrounding the region's banks. Earlier on Thursday, the Italian government approved a $20.8 billion bailout for Monte dei Paschi, one of Italy's largest lenders and the oldest bank in the world.
News about the rescue fund came a day after the bank said it could run out of cash in around four months.
"Given the level of investment by Italian households in Monte Paschi, it makes sense for politicians to make the bank part of their agenda. Having said that and looking at the level of investment historically, the amount invested by households in Italian banks has dropped nearly 52% from its peak which was in 2012," said Naeem Aslam, chief market analyst at Think Market, in a note.
U.S. Treasurys fell on Thursday, with the benchmark 10-year note yielding 2.55 percent and the short-term yield trading at 1.18 percent.
The dropped 4.22 points, or 0.19 percent, to end at 2,260.96, with consumer discretionary leading seven sectors lower and telecommunications the top advancer.
The Nasdaq composite slipped 24.01 points, or 0.44 percent, to close at 5,447.42.
About four stocks declined for every three advancers at the New York Stock Exchange, with an exchange volume of 711.19 million and a composite volume of 2.818 billion at the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 11.5.
—CNBC's Evelyn Cheng contributed to this report.
On tap this week:
10:00 a.m. New home sales
10:00 a.m. Consumer sentiment
*Planner subject to change.