US market dips on worry about economy, Cisco

NEW YORK -- Stocks fell on Thursday after a report showed jobless claims rose last week to their highest in 2 1/2 years, a sign of job market weakness that overshadowed a smaller-than-expected contraction in the vast services sector.

Technology stocks sagged after Cisco Systems Inc (CSCO.O), was downgraded by investment bank UBS on concerns about slowing orders and navigational device maker Garmin (GRMN.O) gave revenue forecasts at the low end of market expectations.

The Labor Department said the number of U.S. workers applying for first-time unemployment benefits soared to the highest level since September 2005, stirring concern that the more influential monthly employment report, due on Friday, may show further deterioration in the economy.

The department will report on the March unemployment rate and non-farm payrolls, and analysts polled by Reuters forecast the economy lost 60,000 jobs outside the agricultural sector last month.

The market pared some losses after the Institute for Supply Management's index of activity in the services sector last month was stronger than expected, although the ISM gauge still showed a contraction rather than expansion in the sector, which accounts for 80 percent of the economy, ranging from banking to hotels to airlines.

"In general, we expect negative headlines on the economy, so the ISM number is surprising," said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York. "But the negative sentiment is pretty thick in the market."

The Dow Jones industrial average (.DJI) was down 51.21 points, or 0.41 percent, at 12,554.62. The Standard & Poor's 500 Index (.SPX) was down 5.37 points, or 0.39 percent, at 1,362.16. The Nasdaq Composite Index (.IXIC) was down 14.05 points, or 0.59 percent, at 2,347.35.

Garmin shares were down 5 percent at $53.59 and Cisco shares dropped 3.2 percent to $24.17.

On the positive side, Research in Motion (RIM.TO) (RIMM.O), the maker of the BlackBerry device, reported results that beat expectations and gave a strong outlook.

Shares of Schering Plough Corp (SGP.N) rose after the drug maker announced a cost-cutting program aimed at saving $1.5 billion.

Research in Motion shares were up 4.8 percent to $121.37 and Schering Plough shares jumped 7.9 percent to $14.95.

(Agencies)