Stocks closed sharply lower, led by a late selloff of financial shares.
The drop shortly before the close came as a massive equity offering by Bank of Americaspurred concerns that other banks could sell new shares and dilute the equity of existing shareholders.
Bank of America announced late Wednesday that it will pay back the $45 billion it took in TARP funds, which the equity offering will help provide.
A continued decline in weekly jobless claims help brighten hopes that the decline in the economy was abating—but surprisingly weak retail sales numbers and a services index reading that indicated unexpected contraction in the industry tempered the enthusiasm.
Investors weighed the economic news against ramifications from one of the biggest media deals: The NBC Universal/Comcast deal became official ahead of the open, giving Comcast a 51 percent stake in NBCU (the parent of CNBC.com), while GE would retain a 49 percent stake.
American Express and Travelers led the bluechip losers.
On the economy, the government said 457,000 jobless claims were filed last week, coinciding with a monthly productivity gain of 8.1 percent that was a bit soft against expectations.
The Institute for Supply Management checked in with a reading of 47.1, falling below the 50 number that indicates expansion and surprising analysts who thought the economy would continue to register modest gains.
Some dismal news from retailers also weighed on Wall Street.
Macy's served as a bellwether for the group and reported that it missed November sales numbers for stores open at least a year. Sales fell 6.1 percent for the month and other retailers appeared ready to follow suit.
Macy's shares fell more than 2 percent while the SPDR Retail ETF, which tracks the industry's leaders, was off 1 percent.
Technology stocks were leading the market, with Comcast keeping the Nasdaq in positive territory.
The S&P lagged in part because consumer-related stocks compose nearly 20 percent of the barometer. Family Dollar was the biggest percentage loser on the S&P after posting disappointing same-store sales figures.
Energy stocks also were weaker as oil prices wavered around breakeven. ExxonMobil was off nearly 1 percent as was the SPDR Energy ETF .
Home builder stocks were weaker after Toll Brothers said it lost $111.4 million in its fiscal fourth quarter, even though the company said it saw signs of improvement in the market.
Land manager Weyerhaeuser saw its shares leap after Credit Suisse raised the Federal Way, Wash.-based company to neutral from underperform.
Toyota Motors registered a sharp gain as fears eased that Japan would intervene on currency and drive value of the yen higher. The move would have hit major exporters such as Toyota.
Mortgage rates fell to a record low 4.71 percent, Fannie Mae said.
Across the Atlantic, the European Central Bank kept rates at a record low of 1 percent as expected. But the ECB said it would begin unwinding some of the measures it used to prop up the economy during the global financial crisis.
The White House holds its "jobs forum," with numerous corporate leaders in attendance, in an event likely to produce many headlines.
The House will vote on permanent changes to the estate tax. The proposed changes would permanently tax estates at 45 percent with an exemption for the first $3.5 million.
Across other markets, prices on Treasurys were down though off their lows for the day, particularly on the short end of the yield curve. Oil fell toward $76 a barrel before stabilizing as the dollar slipped against the euro.
Market breadth was narrowly positive on light volume, as about 745 million shares changed hands approaching with an hour of trading left on the New York Stock Exchange.