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Weekly jobless claims at 225,000

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US service sector activity accelerates to 1-1/2-year high

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East, Gulf coast workers' strike enters third day

(Updates to 4 p.m. ET/2000 GMT)

By Caroline Valetkevitch

NEW YORK, Oct 3 (Reuters) -

U.S. stocks finished lower on Thursday ahead of Friday's

monthly U.S. payrolls report and as investors kept a watchful

eye on the growing conflict in the Middle East.

Data on Thursday showed that the number of Americans

filing new applications for unemployment benefits rose

marginally last week.

Still, Hurricane Helene and strikes at ports could distort

the labor market picture in the near term. The key report this

week for investors could be Friday's employment report for the

month of September.

"It looks like investors are cautious ahead of the jobs

report tomorrow," said Adam Sarhan, chief executive of 50 Park

Investments in New York.

Also, he said, "it's normal to see some profit-taking after

a big rally like we've had over the last two, three weeks."

Investors are eager for more data on the labor market after

the Federal Reserve last month cut its benchmark interest rate

by an unusually large 50 basis points, the first reduction in

borrowing costs since 2020.

According to preliminary data, the S&P 500 lost 9.87

points, or 0.17%, to end at 5,699.67 points, while the Nasdaq

Composite lost 4.83 points, or 0.03%, to 17,920.30. The

Dow Jones Industrial Average fell 192.14 points, or

0.46%, to 42,004.38.

The S&P 500 remains up roughly 19% for the year so far.

The benchmark S&P 500 briefly turned positive after the

Institute for Supply Management survey showed U.S. service

sector activity jumped to a one-and-a-half-year high in

September, further evidence that the economy stayed robust in

the third quarter.

"Once again, services is doing the heavy lifting keeping

this economy humming along," said Brian Jacobsen, chief

economist at Annex Wealth Management.

But also, he said, "oil prices have moved higher and the

port strike can really throw a monkey wrench in things."

The Cboe Volatility index, Wall Street's fear

gauge, was higher.

Energy shares gained along with a surge in oil prices as

concerns mount over a widening regional conflict in the Middle

East that could pose a threat to global crude flows. The S&P 500

energy index was up about 1%.

Israel's military told residents of more than 20 towns

in south Lebanon to evacuate their homes immediately. Asked on

Thursday if he would support Israel striking Iran's oil

facilities, U.S. President Joe Biden told reporters: "We're

discussing that."

A workers' strike on the East and Gulf coasts entered its

third day. Morgan Stanley economists said a prolonged stoppage

could raise consumer prices, with food prices likely to react

first.

Constellation Brands ( STZ ) shares fell after the beer

maker maintained its sales and profit forecast for fiscal year

2025.

Results from some of the big U.S. banks are expected to

unofficially kick off third-quarter S&P 500 earnings at the end

of next week.

(Additional reporting by Johann M Cherian and Purvi Agarwal in

Bengaluru; Editing by Pooja Desai)