Stocks slumped Thursday on disappointment about a suprise jump in unemployment claims and more signs of trouble for Europe's economy.

The market got off to a bad start following an unexpected increase in unemployment benefits claims last week and a lower reading on business activity in the 16 countries that use the euro. More bad news came from Ireland, which reported that its economy shrank 1.2 percent in the second quarter.

The Dow Jones industrial average closed down 77 points. The late-day slide raised doubts about whether a three-week rally that vaulted stocks higher in September would hold. The Dow is still up 6.5 percent for the month, but 4.8 percent below its 2010 high reached on April 26. For the year, it's up 2.2 percent.

Traders were disappointed to see first-time unemployment claims rise last week, breaking a recent trend of declines. The Labor Department said claims jumped by 12,000 and are still at levels that signal employers are not significantly adding new jobs.

"It's all about jobs right now," said Jack Ablin, chief investment officer at Harris Private Bank. "When claims pick up, that's a worrisome sign."

Unemployment claims had fallen consistently in recent weeks, reducing worries that the economy might fall back into recession. Modest improvements in many economic reports have driven stocks sharply higher in September. The Dow Jones industrial average rose 13 of the past 16 days, but broke a five-day winning streak on Wednesday.

The Dow Jones industrial average fell 76.89, or 0.7 percent, to close at 10,662.42.

The Standard & Poor's 500 index fell 9.45, or 0.8 percent, to 1,124.83, while the Nasdaq composite index fell 7.47, or 0.3 percent, to 2,327.08.

Falling stocks outpaced rising ones two to one on the New York Stock Exchange, where volume came to 950 million shares.