Updated from 4:10 p.m. EDT

The major averages closed near their worst levels of the day Thursday, as late selling pressure took hold and prevented stocks from recovering from a drubbing in the prior session.

The

Dow Jones Industrial Average

fell 81.55 points, or 0.9%, to 9343.96, while the

Nasdaq

lost 26.46 points, or 1.4%, at 1817.24. The

S&P 500

shed 6.11 points, or 0.6%, to 1003.27.

"I think the data was more mixed than investors have been used to lately," said Brian Pears, a trader at Victory Capital Management. "The market reflected that."

Stocks struggled for much of the session following a selloff Wednesday, which was sparked by oil and, perhaps more important, valuation concerns. The indices remain sharply higher over the last six months. Since March 11, the Dow is up 24%, the Nasdaq is ahead by 43% and the S&P is higher by 25%. The fact that the market has rallied so much will likely continue to be an overhang, experts said.

"Investors are playing defense because performance has been so good so far this year," said Mike O'Hare, a trader at Lehman Brothers. "They want to lock in their gains going into the final quarter."

The top story of the day was blue-chip

Eastman Kodak

(EK)

, which said it will slash its dividend for the first time in over a century as it tries to improve growth by moving strictly into digital markets and away from traditional film. Shares plunged $4.84, or 17.9%, to $22.15 -- a 17-year low -- and were the biggest drag on the Dow.

Another big loser was

Tupperware

(TUP) - Get Report

, which said it expects a 30% sales decline in its U.S. operations this year. Shares tanked $2.53, or 15.5%, to $13.81.

Market breadth was negative, with decliners outpacing advancers by approximately a 2-to-1 margin on the

New York Stock Exchange

and Nasdaq. Among sectors, drug, semiconductor, banking and transport issues closed down. Oil, utility and gold stocks ended higher.

In economic news, durable goods orders unexpectedly fell 0.9% in August, with a drop in car and computer bookings, after a revised 1.5% increase in July. Economists had expected a 0.6% increase.

"There is always a lot of volatility in the orders data, so it would be a mistake to read too much into one decline," said Chris Low, chief economist at FTN Financial. "But the drop is consistent with the growing sense that the economy, which started the third quarter with a bang, is losing some momentum."

The disappointing durable goods report is a second piece of evidence -- following weak industrial production data earlier in the month -- that manufacturing activity slowed in August.

On a positive note, weekly initial jobless claims fell for a second straight week to 381,000, after falling to a revised 400,000 the prior week. Economists had expected the number to stay at 400,000.

Meanwhile, the housing market remained strong in August. Existing home sales popped 5.5% to their highest level ever, while new home sales rose 3.4% due to solid results in the Midwest.

Elsewhere, stock movers included chipmaker

Micron

(MU) - Get Report

, which fell 52 cents, or 3.7%, to $13.58 even after it reported receiving a $450 million investment from

Intel

(INTC) - Get Report

.

Micron also said Wednesday that its fourth-quarter loss narrowed, beating analysts' estimates.

In earnings news,

Bed Bath & Beyond

(BBBY) - Get Report

posted a sharp rise in quarterly profits and boosted its earnings forecast for the year.

Elsewhere,

Flextronics International

(FLEX) - Get Report

was under pressure after a U.S. court ordered the company to pay $934 million to

Beckman Coulter

(BEC)

, a seller of lab equipment, in a breach-of-contract suit. Flextronics fell $1.10, or 7.3%, to $13.90.

Separately, Wachovia downgraded Beckman Coulter to market perform from outperform, citing valuation concerns. The stock declined $1.75, or 3.8%, to $44.95.

Also from the research front, Banc of America Securities upgraded

Viacom

(VIA.B)

to buy from neutral, saying Wednesday's decline presents a buying opportunity. The firm also believes the company is well managed and poised to gain from an economic recovery.

Banc of America also released a negative note on defense stocks, downgrading

Lockheed Martin

(LMT) - Get Report

,

Northrop Grumman

(NOC) - Get Report

,

Raytheon

(RTN) - Get Report

and

L-3 Communications

(LLL) - Get Report

on concerns the U.S. fiscal deficit has started to pressure the outlook for the defense budget. Morgan Stanley also downgraded L-3.

Two new issues started trading Thursday.

RedEnvelope

(REDE)

, an online retailer, priced 2.2 million shares at $14, the midpoint of its range. The company is the first dot-com to go public this year. Shares rose 55 cents to $14.55.

Anchor Glass

(AGCC)

also had its debut. The beer bottle manufacturer priced 7.5 million shares at $16, the low end of its range. The stock added 80 cents to $16.80.

Treasuries were higher, with the 10-year note up 11/32, yielding 4.09%. Crude oil prices for future delivery continued climbing following Wednesday's reports that OPEC will cut production in the coming months. The dollar was slightly stronger against the yen and the euro.

Overseas markets were mixed, with London's FTSE 100 down 0.8% at 4203 and Germany's Xetra DAX up 1% at 3340. In Asia, Japan's Nikkei closed 1.8% lower at 10,310, while Hong Kong's Hang Seng fell 0.1% to 11,286.