Stocks ended a monthlong rally on a weak note, but still chalked up the best September in 71 years.
Indexes rose sharply at the open Thursday following some better news on the economy, but stumbled at midmorning and stayed lower the rest of the day as traders pulled out profits following a spectacular run for the market in September. The Dow Jones industrial average closed down 47 points, having been up as many as 113 earlier in the day.
The Dow gained 7.7 percent in the month, making it the strongest September since 1939, at the dawn of World War II. However that runup followed a dismal August, and the Dow is still only up 3.5 percent for the year and is 3.7 percent below its closing high for 2010 reached on April 26.
Technology shares, which have been among the best performers this month, led Thursday's pullback. Major technology companies like Apple Inc., Dell Inc. and Google Inc. were all down about 1 percent.
"You can't underestimate people taking profits," said T.C. Robillard Jr., a managing director at investment bank Signal Hill. Robillard said that like most reports throughout the month, Thursday's batch of data only confirmed that the economy is growing very slowly.
Major indexes have been surging all month on signs of incremental improvement in the economy, which have allayed worries that the country would fall back into recession.
Traders were initially upbeat Thursday after a reading on regional manufacturing in the Chicago area jumped in September. Economists had expected the Chicago Purchasing Managers Index to fall slightly. That regional manufacturing report bodes well heading into Friday's monthly report on national manufacturing activity from the Institute for Supply Management.
"The jump in Chicago PMI was nothing short of shocking," said Nick Kalivas, vice president of financial research at MF Global. "It was complemented by the drop in (unemployment) claims."
The Labor Department said Thursday that first-time claims for unemployment benefits fell more than economists had predicted last week. Applications are still at levels that indicate employers aren't necessarily ramping up hiring, but at least the pace of firings seems to be slowing.
The government also slightly raised its estimate on second-quarter gross domestic product, the broadest measure of the nation's economic activity. The government said GDP grew at a 1.7 percent pace in the second quarter, better than the 1.6 percent pace estimated a month ago.
The Dow Jones industrial average fell 47.23, or 0.4 percent, to 10,788.05. The Dow had risen 113 in the opening minutes of trading on improved economic news before pulling back.
Brett D'Arcy, chief investment officer at CBIZ Wealth Management Group, said traders might have also pulled back because the Dow was approaching the psychological barrier of 11,000. The Dow came within 52 points of that level Thursday morning. It has not touched 11,000 since May 4.
"We haven't broken out of that mental cycle that this market might be range bound," D'Arcy said.
The Standard & Poor's 500 index fell 3.53, or 0.3 percent, to 1,141.20, while the Nasdaq composite fell 7.94, or 0.3 percent, to 2,368.62.
Bond prices fell, driving interest rates higher, after the upbeat economic reports dampened demand for defensive investments like bonds. The yield on the 10-year Treasury note, which is used to set interest rates on many kinds of consumer and corporate loans, rose to 2.51 percent from 2.50 percent late Wednesday.
Rising stocks narrowly outpaced falling ones on the New York Stock Exchange, where volume came to 1.3 billion shares.