An HSBC report showed that manufacturing in China continued to contract in September for the eleventh straight month. That's worrisome for U.S. investors, since China is the world's second-largest economy and many U.S. companies have a significant presence in the country. The weak report pushed Asian stocks down between 1% and 2%.
European markets also came under pressure after a regional purchasing managers index fell to a 39-month low. Economists had expected the index to show a slight uptick in business activity.
ING Bank economist Martin van Vliet called it "an unpleasant surprise," adding that it "quashes hopes for an imminent end to the recession."
The news wasn't much better in the United States.
The Labor Department reported a bigger decline in first-time unemployment benefit claims for the latest week. But at 382,000, it's still not low enough to ease worries about high unemployment.
Firms responding to the September Business Outlook Survey from the Federal Reserve Bank of Philadelphia reported nearly flat business activity this month. The survey's indicators for both general activity and new orders improved from last month but recorded levels near zero.
Meanwhile, investors are still waiting to see if stimulus measures from central banks across the globe will jumpstart the global economy.
"Investors are still reassessing the massive monetary stimulus, questioning how many short-term fixes we can handle before we really have to face up to our long-term imbalances," said Jack Ablin, chief investment officer at Harris Private Bank. "We're enjoying the party, but at some point, we're anticipating a hangover."
Investment bank Jefferies (also reported better-than-expected earnings before Thursday's open, but shares of the firm fell 7%. )
Shares of railroad operator Norfolk Southern (Fortune 500) declined after the company lowered its third-quarter guidance late Wednesday. Fellow rail transport firms , CSX (Fortune 500), , Union Pacific (Fortune 500)and , Kansas City Southern ( also fell on the news. )
Online real estate site Trulia ( raised $102 million through an ) initial public offering that priced at $17 a share -- above its estimated range. Shares began trading on the New York Stock Exchange Thursday and rose more than 40% from the IPO price.
Oil for October delivery slipped 11 cents to settle at $92.87 a barrel.
Gold futures for December delivery fell $1.50 to settle at $1,770.20 an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 1.77% from 1.78% late Wednesday.
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