The Dow Jones industrial average fell 70 points in afternoon trading
. The Nasdaq composite index had a steeper loss in percentage terms, a reflection of the drop in tech stocks. Analysts said many traders were on vacation, and the market's resulting light volume helped skew price changes.
Stocks also fell after the Labor Department reported that the number of people filing for unemployment benefits for the first time rose last week to 484,000. The gain was small at 2,000, but economists had expected the number to drop. The news pointed to continuing weakness in the labor market, yet another sign that the economic recovery is weakening.
The latest earnings reports added to the market's darkening view of the economy. Cisco Systems Inc.'s revenue from its latest quarter and its forecast for future revenue both fell short of analysts' expectations. The company's stock fell almost 10 percent and other tech stocks also fell.
Investors have been focused on revenue since companies began reporting second-quarter earnings almost a month ago. They're concerned by the connection between revenue and the economy -- if revenue is down, it's a sign that consumers' reluctance to spend is starting to affect companies' sales and profits. Investors see the revenue shortfalls as another sign of a weakening recovery.
Sara Lee Corp.'s revenue also missed analysts' forecasts. And retailer Kohl's Corp. disappointed the market by lowering its earnings outlook because it expects sales to slow during the second half. That period includes the holiday season, when retailers hope to make a large part of their profits.
Stocks extended their losses from Wednesday, when the Dow fell 265 points as investors reacted to the Federal Reserve's lowering of its assessment of the recovery on Tuesday. Economic data from several countries including the U.S. contributed to the heavy selling.