Stocks ended lower Thursday as investors exercised caution amid dismal economic news and poor earnings reports.

The Dow Jones industrial average closed down 47.75 points at 10,229.15 in afternoon trading. The broader Standard & Poor's 500 Index slipped 3.22 points to close at 1,162.09. The technology-laced Nasdaq Composite Index ended down 17.04 points at 1,842.97.

Thursday's disappointing economic news was a report that said first-time jobless claims rose more than expected last week and the number of people who remained on jobless rolls climbed to 3.2 million — the highest in nine years.

The president of the Federal Reserve Bank of Dallas, Robert McTeer, added fuel to the fire after he said unemployment was likely to rise even further.

Retailers fell after Kmart posted a loss, as the discount giant offered big rebates to attract customers in a profit-slicing price war. In addition, clothing retailer Limited Inc. and others said slumping sales were likely to hurt future earnings, exacerbating worries about the outlook for corporate profits amid a sluggish economy.

"It's a hunt-and-peck type market. Bargain hunters are looking for specific issues, and their timetable is extremely short. It is an in-and-out mentality," said Alan Ackerman, executive vice president of Fahnestock & Co.

Among blue chips, General Motors fell 99 cents to $56.21 and J.P. Morgan Chase slipped 48 cents to $40.72.

The Dow's biggest loser was Merck, which fell $2.71 to $68.51. Its shares were hit, along with those of Pharmacia Corp. after a report questioned the safety of their popular anti-arthritic medicines, Vioxx and Celebrex. Pharmacia fell 80 cents to $42.40.

Other stocks dropped on indications that business remains poor.

Tech losers included Gateway, which fell $1.18 to $8.61 on news that its bonds had been downgraded to junk status by a credit rating agency. The No. 2 U.S. direct PC seller is restructuring in the middle of a price war and a broad downturn in the technology industry, especially in sales to consumers, Gateway's main clients.

The Dow's tech components all traded lower with Microsoft posting the biggest loss, down $1.66 at $59.

There were some winners on Wall Street. Barnes & Noble advanced $1.21 to $41.97 after posting a smaller-than-expected loss for the second-quarter.

Fiber optic networker Ciena, which will enter the S&P 500, replacing American General as it merges with American International Group, rose 36 cents to $17.80.

Ciena also got help from a report showing sales of gear for building optical networks will produce $10.3 billion in global revenues this year — a 52 percent rise from last year.

Amid the slew of corporate scorecards released by retailers, Kmart Corp. reported a loss before charges, saying it faces pressure to lower prices as it works to remodel its U.S. store base and boost customer traffic, and amid a cut-throat price war with other large discount retailers. Shares fell $1.13 to $10.97.

Specialty apparel retail chain Limited slumped $1.27 to $13.93 after saying its profits were cut in half and that weak sales will hurt third-quarter and full year profits.

Lingerie retailer Intimate Brands Inc. said its profits fell 30 percent, matching estimates, while dismal sales could hit third-quarter and full year earnings. Intimate, which operates Victoria's Secret and Bath & Bodyworks, dropped $1.22 to $13.39.

Declining issues outnumbered advancers 8 to 7 on the New York Stock Exchange. Volume came to 966.26 million shares, below the 1.11 billion shares that were traded Wednesday.

The Russell 2000 index, which measures the performance of smaller company stocks, fell 3.76 to 473.42.

Overseas, Japan's Nikkei stock average fell 2.4 percent. In Europe, France's CAC-40 slipped 0.1 percent, Britain's FT-SE 100 fell 0.2 percent, and Germany's DAX index rose 0.7 percent.

Reuters and the Associated Press contributed to this report.