(For a Reuters live blog on U.S., UK and European stock

markets, click or type LIVE/ in a news window.)

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Indexes down: Dow 0.42%, S&P 500 0.86%, Nasdaq 1.19%

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Initial claims for state unemployment benefits drop

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Intel ( INTC ) rises on report chipmaker seeking investment from

Apple ( AAPL )

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Oracle looks to raise $18 billion in debt; shares down

(Updates after markets open)

By Niket Nishant and Sukriti Gupta

Sept 25 (Reuters) - Wall Street's main indexes fell to

their lowest in a week on Thursday, as fresh economic data and

remarks from a Federal Reserve official tempered optimism around

further rate cuts.

Initial claims for state unemployment benefits dropped

14,000 to a seasonally adjusted 218,000 for the week ended

September 20, data from the Labor Department showed. Economists

polled by Reuters forecast 235,000 claims for the latest week.

"The real question will be: now that the jobless data is

less bad than originally anticipated, does that mean the Fed

might not cut (rates) in October and December, but possibly just

wait until December," said Sam Stovall, chief investment

strategist at CFRA Research.

Investors scaled back their expectations of a 25-basis-point

rate cut in the Fed's October meeting to 83.4%, from about 92%

on Wednesday, according to the CME FedWatch Tool.

The U.S. central bank lowered interest rates by 25 bps last

week, its first cut since December, and had signaled more

reductions ahead.

But Chicago Fed President Austan Goolsbee said on Thursday

he was uneasy with cutting rates too quickly, flagging risks

about inflation flaring up.

At 09:58 a.m. ET, the Dow Jones Industrial Average

fell 195.89 points, or 0.42%, to 45,926.27. The S&P 500

lost 56.81 points, or 0.86%, to 6,581.00, while the Nasdaq

Composite was down 268.81 points, or 1.19%, at

22,228.72.

The S&P 500 technology stocks fell 1.2%, with

Nvidia ( NVDA ) and Broadcom ( AVGO ) down 1.3% and 2.8%,

respectively.

The moves led to a 2.2% decline in the broader semiconductor

index, and weighed on the tech-heavy Nasdaq.

Communication services stocks fell 1.1%, pressured

by Alphabet and Meta Platforms ( META ), down 1.7% and

1.4%, respectively.

The pullback underscores the fragility of the September

rally, revealing how sensitive markets remain to even subtle

shifts in economic indicators and Fed messaging.

With valuations still high, equities are vulnerable to any

signs that the Fed may slow its pace of easing rates. That makes

the upcoming economic data crucial in shaping market sentiment.

Investors are now focused on Friday's release of the

Personal Consumption Expenditures index, the Fed's preferred

inflation measure, which could determine expectations for the

path of interest rates.

A potential government shutdown in Washington, where budget

negotiations have so far failed to yield an agreement, only

aggravated the worries.

Analysts warned that a prolonged shutdown could disrupt data

releases critical for assessing economic trends, injecting fresh

volatility into an already uncertain backdrop.

Among stocks, Carmax ( KMX ) hit more than a five-year low,

sliding to the bottom of the S&P 500, after the used-car

retailer reported lower second-quarter profit due to waning

demand. Its shares were last down 22.3%.

Oracle slipped 4.7% following a regulatory filing

that showed the company was aiming to raise $18 billion in debt.

Intel ( INTC ) rose 2.4%, a day after Bloomberg News

reported that the chipmaker has approached Apple ( AAPL ) about

securing an investment.

Brokerage firm Seaport Research Partners upgraded Intel's ( INTC )

stock to "neutral" from "sell".

IBM ( IBM ) rose 2.8% to top the benchmark index, after its

partnership with HSBC ( HSBC ) for trial use of quantum

computers to aid bond trading yielded promising results.

Declining issues outnumbered advancers by a 3.48-to-1 ratio

on the NYSE and by a 4.42-to-1 ratio on the Nasdaq.

The S&P 500 posted eight new 52-week highs and eight new

lows, while the Nasdaq Composite recorded 24 new highs and 50

new lows.