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Stocks slump on dashed stimulus hopes

Updated at 4:05 p.m. ET: Stocks fell Thursday as expectations for swift stimulus action from the Federal Reserve faded and Chinese and euro zone data pointed to stalling global growth.

A slump in Hewlett-Packard shares weighed on the technology sector, but the S&P 500 stayed above 1,400, holding on to most of its recent gains.

Minutes from the latest Federal Reserve meeting indicated the central bank might be ready for another round of stimulus for the economy, giving equities support on Wednesday.

However, St. Louis Fed President James Bullard, a non-voting member of Federal Open Market Committee, said on CNBC that U.S. data has been somewhat better since the latest Fed meeting and the minutes were "a bit stale.

The S&P 500 has risen more than 12 percent since June to a four-year high this week, so Thursday's decline was not seen as a major setback.

"I think investors are taking a second look at the Fed minutes, and realizing that economically we are not as strong as one would expect at this point. There could be a divided reaction to this, but those who are concerned are exiting here, especially after the recent gains in the market," said Rick Meckler, president of investment firm LibertyView Capital in New York.

While Fed Chairman Ben Bernanke in the past has used conferences in Jackson Hole, Wyoming, to signal publicly the Fed's intentions, investors this time may be disappointed.

"With the S&P's near multi-year highs, commodity prices just shy of their highest level since early April and some better-than-expected economic data points since the last FOMC meeting, it's very possible that Bernanke will wait for the August payroll report before making a decision, thus making Jackson Hole a possible non-event," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

This year's Jackson Hole conference takes place at the end of the month.

The Dow Jones industrial average closed the day down 115 points.

World business surveys painted a picture of economic malaise from Beijing to Berlin.

The HSBC Flash China manufacturing purchasing managers index (PMI) - a preliminary reading that provides an early peek at data for August - fell this month to its lowest level since November.

A German business survey showed orders from abroad for the country's goods, a mainstay of its economic strength, fell at the fastest rate in more than three years.

The number of Americans filing new claims for jobless benefits unexpectedly rose last week while U.S. manufacturing improved only slightly in August, worrisome signs for an economy struggling to create enough jobs.

Sales of new single family homes rose in July, matching April's two-year high.

The reports could be interpreted as evidence the economy is not in need of further stimulus from the Fed.

A group of brokerages cut their price targets on Hewlett-Packard's stock after the No. 1 personal computer maker posted an $8.9 billion loss and cut its earnings outlook for the year, echoing concerns raised by rival Dell about faltering demand for PCs.

Shares of U.S. steel producers fell after a Wall Street analyst downgraded the sector on the belief that prices of the metal will decline.

Big Lots shares slid after the retailer reported a lower-than-expected quarterly profit and cut its full-year adjusted earnings forecast.

Reuters contributed to this report.