Stocks fell after news of higher inflation and weakness in the employment market, and as financial stocks skidded.
The Dow Jones Industrial Averagefell more than 20 points, aday after the market ralliedto new five-month highs.
Bank of America , JPMorgan , and General Electric were the top laggards on the blue-chip index, while McDonald's and Kraft rose.
The S&P 500 Index and the Nasdaq also fell.
TheCBOE Volatility Index, widely considered the best gauge of fear in the market, rose to nearly 20. The VIX has traded below 20 all week, the lowest level for the key index since April.
Most key S&P 500 Index sectors were lower, led by financials, materials and industrials. Telecom rose.
Weekly jobless claims rose13,000 for the week ending Oct. 9 to 462,000, according to the U.S. Department of Labor. Analysts had expected a rise of only 5,000 claims, according to Briefing.com. Continuing claims fell to 4.4 million from 4.5 million.
The overall producer price index rose 0.4 percent in September, while core PPI, which excludes volatile food and energy prices, rose 0.1 percent. The increase was more than expected by economists polled by Reuters, who expected overall prices to rise 0.2 percent.
Also reported was the August trade deficit, which widened significantly to $46.35 billion, up from 42.58 billion in July.
"Today is a snapshot of what we should be concerned about," said Lawrence Creatura, a portfolio manager at Federated Investors.
"We’re getting moves in pricing without any signs of a parallel move in wages, our employment market is just stuck," Creatura said. "That doesn’t necessarily imply good things for future standards of living, or the future purchasing power of consumers."
European shares made modest gains with mining stocks leading the advance. Asian stocks were mostly higher, but India gave back some of its gains from the previous session.
The dollar index hit a low for the year, falling more after Singapore widened its currency trading band, which was effectively an increase in interest rates for the Asian nation. Meanwhile,global commoditiesand commodity-related stocks continue to rise.
In financial news, a closely-watched index from RealtyTrac showed foreclosure activity in September roseon both a monthly and annual basis for the first time in four months. The data comes after attorneys general in all 50 statesagreed to join forces to investigate whether banks and other lenders have used false signatures and documents to justify foreclosures.
Concerns over foreclosures were pressuring bank stocks. In addition to JPMorgan and Bank of America, Citigroup and Wells Fargo also slumped.
The SPDR Series Trust KBW Bank Index exchange-traded fund, which tracks the KBW Bank Index, fell more than 3 percent.
Private equity firms have approached News Corp , AOL and other media companies to gauge interest in buying out Yahoo, according to various media reports. Yahoo shares rose.
The stocks of for-profit educators were under pressureafter Apollo Group pulled its 2011 outlook because of uncertainty over future student enrollment. Apollo fell more than 20 percent. Several brokerages cut their ratings and price targets for the stock.
Verizon reported Thursday that it will begin selling Apple's iPad on Oct. 28. The news comes after reports that Apple will sell a version of the iPhone for Verizon Wireless.
Oil prices above$83 a barrel were giving a boost to solar-energy companies. LDK Solar soared more than 7 percent on Thursday, while EvergreenSolar and FirstSolar rose more than 5 percent.
Meanwhile, OPEC left its supply policy unchangedas they met in Vienna Thursday.
Winnebago shares were lower despite a positive fiscal fourth-quarter report showing rising sales and profits.
Shares of LVMH Moet Hennessy Louis Vuitton SA were higher after the French-based luxury-goods retailer reported a 24 percent rise in third-quarter sales, boosted by sales of watches and accessories.
In earnings news, Safeway shares were lower after the grocery-store chain retailer reported lower profits for 2010. Third-quarter earnings were $122.8 million, or 33 cents a share, up from $128.8 million or 31 cents a share a year ago. Sales fell to $9.4 billion from $9.5 billion a year ago.
The tech sector will be in focus Friday as Advanced Micro Devices and Google report earnings after-the-bell.
NetSpend Holdings's $200 million initial-public offering was delayed after the Office of Thrift Supervision found Meta Financial Group, a bank partner of the prepaid debit-card firm, engaged in "unfair or deceptive act."
In economic news, Minneapolis Federal Reserve President Narayana Kocherlakota will discuss the tools the Federal Open Market Committee has at its disposal, during a speech in Bloomington, Minnesota at 5 p.m.
On Wednesday, Richmond Fed President Jeffrey Lacker said he wouldn't support further monetary easing. The Energy Information Administration will release its weekly report on oil and gasoline inventories at 11 a.m. The report was delayed a day because of the Columbus Day holiday.
Coming Up This Week:
THURSDAY:Oil inventories; 30-year bond auction; Minnesota Fed Pres Kocherlakota speaks; OPEC meeting; Earnings from Google and AMD
FRIDAY: Atlanta Fed Pres Lockhart speaks; Bernanke speaks; CPI; retail sales; Empire State mfg survey; consumer sentiment; credit card default rates reported; Earnings from GE and Mattel
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