*

Initial claims for state unemployment benefits drop

*

CarMax ( KMX ) falls to lowest in over five years

*

Investors await PCE data Friday

(Updates to close)

By Caroline Valetkevitch

NEW YORK Sept 25 (Reuters) - U.S. stocks ended lower on

Thursday, with most S&P 500 sectors down as economic data

increased uncertainty about the Federal Reserve's outlook for

interest rate cuts.

Data showed initial jobless claims dropped 14,000 to a

seasonally adjusted 218,000 for the week ended September 20.

Other data showed the U.S. economy grew faster than previously

estimated in the second quarter amid strong consumer spending

and business investment.

Also, Chicago Fed President Austan Goolsbee said on Thursday

he was uneasy with cutting rates too quickly, with inflation a

risk.

The comments and data follow the U.S. central bank's move last

week to lower rates by 25 basis points - its first cut since

December - after signs of weakness in the labor market. It also

gave indications of more rate cuts ahead. Investor expectations

of another 25 bps cut in the Fed's October meeting are now at

83.4%, down from about 92% on Wednesday, according to the CME

FedWatch Tool.

"The economic data that's come out over the last day or two

is kind of confusing in that, in my mind, it calls into

question" how much the Fed may cut rates again and whether the

Fed needs to cut rates again this year, said Peter Tuz,

president of Chase Investment Counsel in Charlottesville,

Virginia.

According to preliminary data, the S&P 500 lost 33.77

points, or 0.51%, to end at 6,604.20 points, while the Nasdaq

Composite lost 116.03 points, or 0.50%, to 22,381.83.

The Dow Jones Industrial Average fell 167.38 points, or

0.36%, to 45,953.90.

Most of the S&P 500 sectors ended lower.

Earlier this week, Fed Chair Jerome Powell said the U.S.

central bank needs to balance inflation concerns with a

weakening job market in its coming interest rate decisions.

"There's been mixed economic data," said Rick Meckler,

partner at Cherry Lane Investments, a family investment office

in New Vernon, New Jersey. "It makes people focus more on the

inflation side" of the economic outlook.

In addition, shares of Accenture ( ACN ) were down even after

the consulting firm reported revenue above expectations.

CarMax ( KMX ) shares fell after the used-car retailer

reported lower second-quarter profit.

Investors are eager to hear soon from more companies on

their quarterly results, especially with valuations considered

high after the market's run of record highs recently.

Investors are bracing for Friday's release of the Personal

Consumption Expenditures price index, the Fed's preferred

inflation measure, which could shape expectations for the path

of interest rates.

Even more important will be the next monthly U.S. jobs

report, which is due next week.

(Additional reporting by Niket Nishant, Sukriti Gupta and Purvi

Agarwal in Bengaluru; Editing by Shilpi Majumdar and Aurora

Ellis)