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Stocks rally fizzles; S&P slips below 2,000

The New York Stock Exchange on Aug. 9,

The New York Stock Exchange on Aug. 9, 2011. Global stock markets were muted Thursday, Aug. 28, 2014 before U.S. economic data and possible policy announcements from Japan. Credit: AP / Mark Lennihan

The rally that lofted the Standard & Poor's 500 index above its 2,000 milestone, fizzled Thursday as financial markets took modest losses. The slide in light trading began early on as the escalating conflict in Ukraine and a batch of disappointing earnings and profit outlooks from retailers eclipsed some good news on the U.S. economy.

At the close on Wall Street, the S&P 500 was down 3.4 points, or nearly 0.2 percent, to 1,996.7. The Dow Jones industrial average lost 42.4 points, or nearly 0.3 percent, to 17,079.6. The Nasdaq composite shed almost 12 points, or nearly 0.3 percent, to close at 4,557.7. Seven of the 10 sectors in the S&P 500 fell, led by financial stocks. Utilities rose.

UKRAINE TENSIONS: Ukraine President Petro Poroshenko said Russian forces have entered his country and called an emergency meeting of the nation's security council. Security officials said two columns of tanks entered the country's southeast earlier in the day.

NOT APPEALING NUMBERS. Abercrombie & Fitch fell 4.8 percent after the teen clothing company reported revenue that fell short of analysts' estimates. Tough competition and fickle teen tastes have dampened sales this year. The stock slid $2.13 to close at $41.97.

Disappointing earnings also prompted investors to sell shares in Coty. The beauty products retailer declined 62 cents, or 3.4 percent, to close at $17.39.

Williams-Sonoma dropped 11.7 percent after the seller of cookware and home furnishings issued a disappointing full-year profit outlook late Wednesday. The stock shed $8.96 to close at $65.93.

Tilly's tumbled 4.3 percent after the retailer forecast a difficult summer, saying customer traffic is down and merchandise discounts are cutting into its profit. The stock slid 37 cents to close at $8.15.

Shares in Genesco also plunged after the seller of clothing, footwear and accessories issued a profit outlook that was shy of Wall Street's expectations. Genesco sank $6.73, or 7.6 percent, to close at $81.94.

ECONOMIC REBOUND: The U.S. Commerce Department estimates that the economy grew at an annual rate of 4.2 percent in the April-June quarter, better than previously thought. The assessment supports expectations that the second half of 2014 will prove far stronger than the first half.

HIRING BELLWETHER: The U.S. Labor Department said the number of Americans seeking unemployment benefits dropped last week to 298,000, a low level that signals employers are cutting fewer jobs and hiring is likely to remain strong.

INTEREST RATE IMPACT? While the situation in Ukraine is a factor, some investors are also worried that the surprisingly strong economic growth and unemployment benefit application data will spur the Federal Reserve to move up its timetable on raising interest rates, said Doug Cote, chief market strategist at Voya Investment Management.

"The strong economic data is going to force the Fed's hand to start raising rates," Cote said.

Most economists have been anticipating that the Fed will begin raising its key interest rate by mid-2015.

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