Stocks: Investors on edge over economy

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NEW YORK (CNNMoney) -- U.S. stocks were headed a retreat Thursday, after the latest reading on jobless claims showed a large number of Americans remain unemployed.

Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were down about 1% ahead of the opening bell. Futures measure current index values against perceived future performance.

The Labor Department's weekly initial jobless claims report showed that claims totaled 400,000 last week. Economists had expected weekly unemployment claims to rise to 405,000 from last week's 398,000 claims.

While the number was mildly better than expected, it still indicated weakness in the labor market.

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Amid concerns that the recovery is faltering, investors have been taking their cues from the latest economic reports, many of which have been weaker than expected.

After trading sharply lower most of the day, stocks slowly climbed back up to end Wednesday's session modestly positive. The late-stage comeback ended an eight-session losing streak for the Dow, as investors speculated that the Federal Reserve will launch another round of stimulus.

Economy: Investors are on edge ahead of Friday's closely watched monthly jobs report, which is expected to show that the U.S. economy created 75,000 jobs in July, according to a consensus of 16 economists surveyed by CNNMoney.

In June, the economy added a paltry 18,000 jobs. The unemployment rate is expected to hold steady at 9.2%.

Companies: Dow member Kraft (KFT, Fortune 500) said it will split its grocery business and snacks business into two different companies. The separation is expected to be completed before the end of 2012. The food giant also delivered second-quarter earnings and sales above estimates, and raised its forecast for the year. Shares of Kraft spiked 6% in premarket trading.

Auto giant General Motors' (GM, Fortune 500) second-quarter earnings nearly doubled to $2.5 billion, as revenue rose 19% and topped expectations. Shares of GM jumped more than 3%.

Insurance company AIG (AIG, Fortune 500) and newly public LinkedIn (LNKD) are scheduled to report financial results after the closing bell Thursday.

In addition to quarterly financial reports, retailers were also announcing July sales results.

Costco Wholesale Corp. (COST, Fortune 500) said its same-store sales climbed 10% last month, while Limited (LTD, Fortune 500) said sales rose 6%.

World markets: European stocks were lower in afternoon trading. Britain's FTSE 100 dropped about 2%, while the DAX in Germany and France's CAC 40 fell about 1%.

The European Central Bank met to discuss the region's monetary policy, and the debt problems facing Italy and Spain. The ECB left interest rates unchanged at 1.5%, but investors will be focused on president Jean-Claude Trichet's press conference following the meeting.

Meanwhile, European Commission president Jose Manuel Barroso urged European Union officials to reassess the recent bailout funds, as "markets remain to be convinced that we are taking the appropriate steps to resolve the crisis."

Asian markets ended the session mixed. The Shanghai Composite and Japan's Nikkei edged up 0.2%, while the Hang Seng in Hong Kong fell 0.5%.

The Bank of Japan took steps to stem the yen's rise, by easing its monetary policy and selling a trillion yen or $12.6 billion. Japan's move came a day after Switzerland intervened to curb the Swiss franc's rise.

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Currencies and commodities: Following Japan's pledge to lower the value of the yen, the dollar surged almost 4% against the Japanese currency.

The dollar also rose versus the euro and British pound.

Oil for September delivery fell 88 cents to $91.05 a barrel.

Gold futures for December delivery rose $5.60 to $1,671.90 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 2.59 % from 2.6% late Wednesday.