The decline to a closing level of 9,985.81 came despite upward momentum early in the day. The Labor Department reported that new claims for unemployment insurance totaled 473,000 in the most recent week, down from 500,000 a week earlier.
Although investors welcomed that improvement, it wasn't enough to turn an overall negative tide in sentiment.
US stocks overall have lost about 5 percent of their value in the past month. The widely watched Dow index fell 0.7 percent Thursday alone. It has spent much of the past year hovering within 500 points above 10,000, or sometimes just below that round-number benchmark.
Investors are struggling to figure out whether the economy will be strong enough to generate modest job creation – and thus create a platform for rising corporate profits – or not. In recent weeks, concerns that the economy is dipping back into recession have been rising, but that outcome remains unclear.
A broader index of large US companies, the Standard & Poor's 500 index, also fell by about 0.7 percent Thursday. But it managed to close slightly above 1,045 – a level on the S&P that many stock-market strategists see as an important threshold. The day's stock-market performance would have been even more worrisome had the S&P breached that level.
Will the market downdraft continue?
A big test comes Friday, when investors will digest a revised figure for America's gross domestic product (GDP) in the second quarter and a speech by Federal Reserve Chairman Ben Bernanke.
The Fed has downgraded its view of the economy, and is now walking a delicate line. If it shows too much pessimism it could further dampen investor confidence. But if the economy keeps weakening, the Fed may need to step in with new measures aimed at spurring growth and preventing a damaging bout of deflation in prices and wages.
GDP rose at an annualized pace of 3.7 percent in the first quarter, but only 2.4 percent in an early estimate of second quarter growth released last month. Friday's revision could bring second quarter GDP down to a pace of about 1.4 percent.
Even if economic growth remains positive in coming months, one risk is that the momentum will be too slow to generate new jobs. That could mean rising unemployment as new people enter the labor force seeking work, and as productivity gains allow companies to boost production without hiring. Consumer spending and confidence would remain weak.
Not all economic indicators have been worsening. Mortgage applications ticked upward this week on record-low interest rates. Bank credit conditions, more broadly, appear to be improving. Many investment strategists believe the recent Dow losses will prove to be a temporary "correction" rather than a full-fledged bear market.
But high jobless claims and weak orders for durable goods are among the signs that have caused doubt to trump investor hope lately.