By Anna Hirtenstein and Paul Vigna 

U.S. stocks slipped Thursday, pulling back after an August rally, despite data showing fewer Americans applied for jobless benefits in the latest week.

The Dow Jones Industrial Average and S&P 500 have climbed in eight of the past 10 trading sessions on signs of slowing coronavirus infections and a pickup in economic activity.

The S&P 500 has flirted with record levels in recent days but ended Thursday's session down 6.92 points, or 0.2%, at 3373.43, still within 0.4% of its Feb. 19 record. The index wobbled between gains and losses for much of the day after briefly eclipsing its closing record in intraday trading Wednesday.

It has been only 123 trading days since the S&P 500 set its last high. A new record would be the fastest recovery from a bear market in history. Moreover, in the 100 trading days since the March 23 low, the index is up 51%--its best 100-day spurt since 1933.

"I could say I'm not surprised, and give you all the reasons why it happened, but I think everybody is surprised by it and how quickly it happened," Shawn Snyder, head of investment strategy at Citi Personal Wealth Management, said of the approaching record on the index.

The Dow Jones Industrial Average dropped 80.12 points, or 0.3%, to 27896.72, while the tech-heavy Nasdaq Composite index rose 30.27 points, or 0.3%, to 11042.50.

Investors appeared to be caught between conflicting developments on the economy.

Initial jobless claims fell to 963,000 in the week ended Aug. 7, ending a 20-week streak of results above 1 million. However, it is also more likely that the layoffs occurring now are permanent, analysts warned, in contrast to the temporary layoffs and furloughs at the onset of the pandemic.

Having weekly claims under 1 million is encouraging, said Lydia Boussour, senior economist at Oxford Economics, "but it's still a painfully high number. We still have a labor market that is very impacted by this crisis."

Investors are concerned that the expiration last month of the extra $600 in weekly unemployment benefits is likely to leave less money in workers' pockets and dent consumer spending, becoming a drag on the economy.

"The economy needs another fiscal booster," Ms. Boussour said. "If it doesn't get it, we run the risk of activity stalling and the labor market losing steam again."

A standoff between lawmakers on a fresh stimulus package showed no signs of easing Thursday, and negotiations may be stalled until next month. House Speaker Nancy Pelosi said the two sides remain "miles apart," and the Democrats would only resume talks if Republicans agree to spend significantly more than $1 trillion.

The U.S. reported nearly 56,000 new coronavirus cases, the highest daily tally in four days. While the data suggests only about one-fifth of states are registering an increase in cases, some are logging declines in testing.

Among individual stocks, shares of Cisco Systems tumbled $5.38, or 11%, to $42.72, their worst one-day drop since 2011, after the networking-equipment company gave earnings guidance for the current quarter that was below analysts' predictions. Its chief financial officer, Kelly Kramer, stepped down, too.

The yield on the 10-year U.S. Treasury note ticked up for the fifth straight session, to 0.714% Thursday from 0.669% a day earlier amid weak demand in a $26 billion auction of 30-year bonds.

In commodities, gold rose 1.1% to $1,956.70 a troy ounce as the volatility seen in recent days continued. This week's stint of choppy trading paused a monthslong rally that took the precious metal to an unprecedented high.

"We keep gold because there are still uncertainties, real rates are low, inflation may be higher than expected," said Luc Filip, head of private banking investments at SYZ Private Banking. But the short-term potential for a rally in gold has now reduced, he said, adding he pared the holdings in his portfolio two days ago to book profits.

U.S. crude-oil prices fell 1% to $42.24 a barrel. The International Energy Agency on Thursday projected a deeper rout in oil demand for 2020 than previously forecast because of the high coronavirus case numbers in several major economies.

Overseas, Japan's Nikkei 225 rose 1.8% after the central bank's producer-price index, which measures manufacturing costs and inflation, came in above expectations for July.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Paul Vigna at paul.vigna@wsj.com

(END) Dow Jones Newswires

August 13, 2020 17:11 ET (21:11 GMT)