U.S. stocks fell, with the Dow Jones Industrial Average tumbling to a one-month low, after a gauge of China's manufacturing contracted and investors analyzed corporate earnings.
Cliffs Natural Resources slipped 4.3 percent, following European commodity producers lower. JPMorgan Chase and American Express slid at least 1.9 percent to pace losses among financial firms. American Eagle Outfitters lost 7.8 percent after saying its CEO is leaving. Netflix surged 16 percent as it projected customer growth that topped analysts' estimates.
The Standard & Poor's 500 Index declined 0.9 percent to 1,828.46 at 4 p.m. in New York. The Dow lost 175.99 points, or 1.1 percent, to 16,197.35. About 7.4 billion shares changed hands on U.S. exchanges, 22 percent above the three-month average.
"U.S. equities were at the intersection of full valuations and increasingly positive sentiment and that combination has made them vulnerable to less than perfect news," said Mark Luschini, chief investment strategist at Janney Montgomery Scott, which oversees $63 billion. "We set the stage this morning with the data from China for the market to be a little bit nervous and the data points from the U.S. didn't help to stem that anxiety."
The S&P 500 has fallen 1.1 percent for the year while the Dow has dropped 2.3 percent, after the broader gauge jumped 30 percent to a record last year, the most since 1997. Three rounds of Federal Reserve monetary stimulus have helped the S&P 500 rise 170 percent from a 12-year low in 2009.
The rally has boosted equity valuations to near the highest level since 2009. The S&P 500 trades at 15.5 times the estimated earnings of its members, more than the five-year average multiple of 14.1, data compiled by Bloomberg show.
Data on Thursday showed applications for U.S. unemployment benefits held near a six-week low, showing firings remain muted following the holidays. U.S. house prices advanced 0.1 percent in November from October, slowing growth that indicates the real estate recovery may be losing strength, the Federal Housing Finance Agency said in another report.
Separate releases indicated purchases of previously owned homes climbed in December for the first time in four months, while the index of U.S. leading indicators rose.
Fed officials have been scrutinizing economic data to determine the timing and pace of any reductions to their stimulus. The central bank, which next meets Jan. 28-29, decided at its December meeting to start cutting its monthly bond purchases by $10 billion to $75 billion.
In China, a report on Thursday indicated factory output may contract this month, based on a preliminary Purchasing Managers' Index from HSBC Holdings and Markit Economics.
"China has been the growth story for the better part of 10 or 15 years, and all of a sudden we're starting to see contraction," said Chris Bouffard, chief investment officer of the Mutual Fund Store in Overland Park, Kan., which oversees $8.5 billion. "That's going to take a while for market participants to get comfortable with."