The Dow Jones industrial average was off 66.70 points to 9,834.69, and the Nasdaq composite index slipped 5.46 to 1,875.05. CNET's technology indexes were mixed. The markets will be closed Thursday in the United States for Thanksgiving.
News slowed to a trickle and trading volume was light. Analysts suggested that investors were locking in profits for the short week.
A report on jobless claims for the week ended Nov. 17 showed the number of initial claims dropped for the fourth straight week, giving economists hope that the employment situation is improving. Claims fell by 15,000 to 427,000 during the week, a considerable drop considering that on average economists had forecast a rise in claims to 461,000.
"Claims take on added significance this morning because the data covers the survey week for November payroll employment and because they have been one of the few indicators that have shown some improvement over the last month," said Deutsche Banc Alex Brown analyst Peter Hooper, who expected the number of claims to rise.
The report also surprised Wall Street with information on continuing jobless claims. The number of people returning to collect benefits fell to 3.73 million in the Nov. 10 week, from 3.8 million the preceding week. That was the first time the number of continuing claims fell since the week ended Sept 15.
U.S. consumer sentiment rose unexpectedly in early November, according to a report from the University of Michigan. The preliminary November consumer sentiment index rose to 83.5 from 82.7 in October. But the data is based on a preliminary survey of just 250 people, which will be revised later this month and is less influential than similar surveys that the Conference Board publishes.
Among actively traded shares, Microsoft shares fell $1.35, or 2 percent, to $64.05 after a downgrade from Salomon Smith Barney. Analyst Richard Gardner lowered the stock to a "neutral" from "outperform" rating based on valuation.
The analyst also predicted that the company has been overly optimistic about estimates for its March and June quarters.
In news more favorable to the software giant, a proposed settlement agreement in Microsoft's antitrust suits may help the company and its PC allies further erode Apple Computer's position in education, analysts said.
Tech Data was off sharply after a downgrade from Salomon Smith Barney. Gardner lowered the stock to "outperform" from "buy" based on "valuation and weakening European IT spending." Shares fell $2.62, or 6.5 percent, to $38.
Triquint Semiconductor was down $2.33, or 12 percent, to $17.22 after the company, which develops integrated circuits for the communications industry, said Tuesday that it still sees fourth-quarter revenue at the low end of its forecast of $75 million to $80 million.
U.S. Bancorp Piper Jaffray lowered its rating to "neutral" from "buy" on the news.
Among other technology bellwethers, Intel rose 86 cents to $30.81, Oracle fell 48 cents to $14.08, and Cisco Systems fell 64 cents to $19.15.
AOL Time Warner fell 50 cents to $36.47, Yahoo rose 4 cents to $14.93, and Amazon.com gained 20 cents to $8.80.
Staff and Reuters contributed to this report.