Wall St falls on weak data, deflation worries

NEW YORK (Reuters) - Stocks fell on Thursday after anemic economic data underscored fears about slumping economic growth.

An unexpected fall in regional factory activity and a third straight month of decline in producer prices raised concerns about deflation, cooling investors' enthusiasm for the strong start to the earnings season that had lifted stocks off recent lows.

Earnings announced by JPMorgan Chase & Co before the market's open also raised concerns about major banks. Although its quarterly profit beat expectations, the company's investment banking arm showed a weak performance, and the stock fell 0.3 percent to $40.25.

Commenting on several negative economic reports, Jim Awad, managing director at Zephyr Management in New York, said they confirmed the recovery's pace is slowing, "adding to fears that post stimulus, the economy is going to ratchet down in terms of its recovery."

The Dow Jones industrial average was down 60.69 points, or 0.59 percent, at 10,306.03. The Standard & Poor's 500 Index was down 6.24 points, or 0.57 percent, at 1,088.93. The Nasdaq Composite Index was down 13.26 points, or 0.59 percent, at 2,236.58.

JPMorgan's investment banking net income fell 6 percent as markets were roiled by the European debt crisis, the BP oil spill, and the U.S. equity "flash crash." For details, see

"It's been a tough environment to trade, and we're still concerned about the investment banks," said Tim Ghriskey, chief investment officer at Solaris Asset Management, which oversees about $2 billion.

But in the options market, trades on exchange-traded funds that track the S&P 500 Index indicated a short-term bullish sentiment going into options expiration on Friday.

"We continue to see potential pinning of SPX to the 1100 strike," said Scott Fullman, director of derivative investment strategy at WJB Capital Group.

The S&P Depository Trust , down 1 percent at $108.65, was seeing pinning potential between the $107 and $110 strikes, he said.

Pinning is when a stock or index closes at or around its corresponding at-the-money option strike.

Banks stocks were pressured after JPMorgan's results. Citigroup Inc shares fell 2.1 percent to $4.12 and Bank of America Corp dropped 2.7 percent to $15.25, both ahead of their earnings on Friday.

The passage of a broad banking reform bill also looked more likely, with Senate leaders setting a series of final votes on the measure.

The S&P Financial Index slid 1.2 percent and contributed the most to the benchmark S&P 500's decline.

Advanced Micro Devices Inc and Google Inc will both report quarterly results after the closing bell. AMD slid 1.6 percent to $7.32, while Google slipped 0.6 percent to

$488.62.

Alcoa and Intel began the earnings reporting season this week with strong results.

In economic news, the Philadelphia Federal Reserve Bank said factory activity in the mid-Atlantic region fell unexpectedly, while the New York Federal Reserve Bank said New York manufacturing hit the lowest since December 2009.

The U.S. Labor Department said the Producer Price Index declined for a third straight month. In June, the PPI fell 0.5 percent compared with the dip of 0.1 percent expected by economists polled by Reuters.

(Reporting by Angela Moon; Additional reporting by Edward Krudy; Editing by Kenneth Barry)