NEW YORK - Stocks fell Thursday after the government reported that the number of Americans applying for unemployment benefits dropped to the lowest in nearly six years last week. Also, the U.S. economy grew at a 3.6 percent annual rate from July through September, the fastest since early 2012.
Investors believe the encouraging signs on the economy will push the Federal Reserve closer to pulling back on its $85 billion-a-month bond-buying program. That stimulus, which is intended to hold down interest rates, has been helping to power this year's record-setting run in the stock market.
The Standard & Poor's 500 index dropped for the fifth time in a row, matching its longest losing streak since September.
"If they do cut the bond purchases, the knee-jerk reaction for the market will be to move down," said Chris Gaffney, a senior market strategist at EverBank.
The S&P 500 index fell 7.78 points, or 0.43 percent, to 1,785.03. The Dow Jones industrial average fell 68.26 points, or 0.43 percent, to 15,821.51. The Nasdaq composite declined 4.84 points, or 0.12 percent, at 4,033.16.
While few investors think that the Fed will announce a reduction to its bond purchases at its meeting this month, many believe policy makers could make the move in March.
Several retailers fell after disappointing results. L Brands, the owner of Victoria's Secret, Bath & Body Works and other stores, lost $1.07, or 1.7 percent, to $62.18 after reporting that November sales dropped 5 percent.
Gaming company Electronic Arts was the biggest decliner in the S&P 500 index after Forbes reported that the company had been forced to delay future games from one of its developers due to ongoing problems with its Battlefield 4 game. The company's stock fell $1.33, or 6 percent, to $21.01.
The stock market may also be sliding this month as investors sell some of their best-performing holdings given the strong returns this year, said Natalie Trunow, chief investment officer at Calvert Investments.
"I just don't know if folks will try to squeeze another percentage point (out of the market), or just sell and go home," said Trunow.
In government bond trading, the yield on the 10-year Treasury note rose to 2.87 percent from 2.83 percent Wednesday. The yield is the highest it's been in more than two months as traders expect the Fed to reduce its bond purchases.