Wall Street drops on weak jobless, manufacturing data

NEW YORK (Reuters) - Stocks fell on Thursday after data on jobless claims and regional manufacturing showed further signs of economic weakness, adding to concerns about the sustainability of a recovery.

Major U.S. indexes dropped more than 1 percent after a report indicated factory activity in the U.S. Mid-Atlantic region contracted in August to its lowest level in more than a year. For details, see

Stocks had opened lower after data showed weekly initial jobless claims rose to a nine-month high last week.

"If you don't want to call it a full double-dip (recession), you're certainly in a flat line now. And you're not seeing any growth," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

The Dow Jones industrial average <.DJI> slid 132.29 points, or 1.27 percent, at 10,283.25. The Standard & Poor's 500 Index <.SPX> was down 14.57 points, or 1.33 percent, at 1,079.59. The Nasdaq Composite Index <.IXIC> dropped 26.53 points, or 1.20 percent, at 2,189.17.

The Nasdaq was also weighed by shares of chipmaker Intel Corp , which was down 3.4 percent to $18.91 after it offered to buy security software maker McAfee Inc for about $7.68 billion, or $48 per share. McAfee surged 58 percent to $47.21.

Sears Holdings Corp tumbled 7.2 percent to $62.44 after the department store group reported a wider-than-expected quarterly loss due in part on a lackluster performance by its Kmart discount chain.

Williams-Sonoma Inc fell 2.5 percent to $27.62, even after the upscale home goods chain posted a far stronger-than-expected quarterly profit and boosted its outlook.

August options are set to expire on Friday, which could generate more volume and amplify stock moves as traders adjust their hedges.

Such dynamics can lead to pinning, where a stock or index closes at or around its corresponding at-the-money option strike.

Ahead of the expiration, the S&P 500 index has been slowly moving toward the 1,100 strike, where there have been indications of a potential pinning, said Scott Fullman, director of derivative investment strategy at WJB Capital Group. Indications are also pointing to a likely pinning at the $110 strike price for the SPDR S&P 500 fund, he said.

(Reporting by Angela Moon; editing by Jeffrey Benkoe)

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