Stocks Fall on Fed Skepticism; Most Dow Shares Decline

Continuing claims for the week ended Aug. 11 rose 4,000 to 3.317 million, compared with the expected 3.298 million.

The FTSE in London closed flat and the DAX in Germany settled off by 1%. Markit Economics said Thursday that output declined in both the manufacturing and service sectors of the eurozone for the seventh straight month in August.

Meanwhile, Markit and HSBC said that the flash read on China's manufacturing purchasing managers' index fell to a nine-month low in August.

Earlier, the Hong Kong Hang Seng index finished up by 1.2% and the Nikkei in Japan closed up by 0.5% with the help of global stimulus optimism.

"We will forsake holding hands and singing 'We Are the World' for now," said investment strategists at Oppenheimer Asset Management. "Structural challenges on the global landscape, including those in China and Europe, along with election year and fiscal cliff worries stateside will take time to resolve and keep us balanced and still focused on risk as well as on opportunity rather than wildly celebrating the near term."

In addition, the Census Bureau said new-home sales rose to a seasonally adjusted annual rate of 372,000 in July from an upwardly revised June rate of 359,000. The consensus view among economists was that sales would reach a seasonally adjusted annual rate of 368,000.

However, the median new-home price was $224,200, down 2.5% from July 2011.

Meanwhile, the Federal Housing Finance Agency's house price index for June rose by a seasonally adjusted 0.7% from May.

House prices rose 1.8% in the second quarter from the first quarter of this year.

October crude oil futures dipped 99 cents at $96.27 a barrel while December gold futures soared $32.30 to settle at $1,672.80 an ounce.

The benchmark 10-year Treasury was up 7/32, diluting the yield to 1.671%. The greenback was down 0.2%, according to the dollar index.

In corporate news, Rambus (RMBS), the Sunnyvale, Calif.-based technology licensing company, said after Wednesday's close that it plans to lay off 15% of its workforce as part of a restructuring. Shares fell 1.9%.

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