Stocks finished in negative territory Thursday, with the S&P falling below its key 1400 milestone, weighed down by a weak ISM non-manufacturing report and as investors stayed cautious ahead of Friday's government jobs data.
The Dow Jones Industrial Average slumped 61.98 points, or 0.47 percent, to close at 13,206.59, led by Bank of America and H-P .
The S&P 500 erased 10.74 points, or 0.77 percent, to finish at 1,391.57. The Nasdaq fell 35.55 points, or 1.16 percent, to end at 3,024.30.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, closed above 17.
Most key S&P sectors closed in the red, led by energy and materials, while consumer staples eked out a small gain.
“This selloff got worse as the day went on…volume wasn't that heavy either,” said Joe Saluzzi, co-manager of trading at Themis Trading. “It may be the anticipation of the jobs number tomorrow.”
Stocks first took a dip following news growth in the service sector slowed in April, according to the ISM non-manufacturing index. The report even overshadowed news that jobless claims fell more than expected , dropping 27,000 to a seasonally adjusted 365,000, according to the Labor Department, the biggest weekly decline in almost a year.
Investors will be closely watching the monthly jobs report for April, due Friday. The latest estimates from economists surveyed by Reuters call for a gain of 170,000 new positions, a gain from March's tepid gain of 120,000.
“While we don’t think the economy’s rolling over to a double-dip, we’ll see softness continue through the second quarter,” said Phil Orlando, Chief Equity Market Strategist at Federated Investors. “Then, we’ll start to see a roll-off of the issues that have created the softness—energy prices will come down and global economic issues in the emerging markets and Europe will start to reverse.”
The ECB held its interest rate at 1 percent . ECB President Mario Draghi said the economic outlook was "subject to downside risks" and that the latest data "highlight prevailing uncertainty. He added that inflation will remain in line with price stability objectives, but is likely to stay above 2 percent this year. European shares held modest gains following the announcement.
Among earnings, General Motors posted earnings that topped expectations as the U.S. automaker increased prices and was able to cut losses in its European operations.
Green Mountain plunged more than 40 percent after the single-serve coffee company slashed its full-year sales outlook and warned that its growth was beginning to see a slowdown .
Whole Foods Market jumped after the upscale grocery store chain beat earnings estimates and boosted its full-year earnings guidance. In addition, at least five brokerages raised their price target on the firm.
Chesapeake rallied, rebounding from its 14-percent plunge in the previous session, after CEO Aubrey McClendon apologized for his personal financial dealings . The company also posted earnings that missed expectations earlier this week.
Kraft , AIG and LinkedIn are slated to post earnings after the closing bell tonight.
A number of retailers traded lower as sales showed a slowdown in April with many companies falling short of analysts' expectations, due to the early start of spring. Target , Costco and Wet Seal were among companies that posted disappointing same-store sales for the month, while Limited continued to show signs of strength.
Research In Motion tumbled to hit eight-year lows. The smartphone maker wraps up its three-day BlackBerry World developer conference.
Carlyle Group held small gains on its first day of trading after the private equity firm priced its IPO at $22 a share on Wednesday night, lower than its original price range of $23 to $25 a share.
Meanwhile, Facebook set the range for its IPO between $28 and $35 a share according to an amended S1 filing. The social network giant will begin its road show next Monday and is expected to start trading on May 18, according to sources.
Also on the economic front, nonfarm productivity fell in the first quarter at a 0.5 percent annual rate, according to the Labor Department, in line with expectations. Meanwhile, labor costs grew 2 percent in the first quarter after increasing at a 2.7 percent pace in the previous quarter.
—Follow JeeYeon Park on Twitter: @JeeYeonParkCNBC —
Coming Up This Week:
FRIDAY: Government non-farm payrolls, Alcoa shareholders mtg, Berkshire shareholders mtg; Earnings from Berkshire Hathaway
More From CNBC.com: