*

Initial claims for state unemployment benefits drop

*

CarMax ( KMX ) falls to lowest in over five years

*

Indexes: Dow down 0.5%, S&P 500 down 0.6%, Nasdaq down

0.7%

(Updates to afternoon)

By Caroline Valetkevitch

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

Thursday, with most sectors down, as economic data increased

uncertainty about the 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.

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 - in its first cut since

December. It also gave indications of more rate cuts ahead, amid

weakness in the job market. 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.

All S&P 500 sectors but energy were lower in

afternoon trading.

The Dow Jones Industrial Average fell 215.60 points,

or 0.46%, to 45,906.96, the S&P 500 lost 42.51 points, or

0.64%, to 6,595.55 and the Nasdaq Composite lost 159.04

points, or 0.71%, to 22,338.87.

In addition, shares of Accenture ( ACN ) were down 3% even

after the consulting firm reported revenue above expectations.

CarMax ( KMX ) shares were down 19% 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 a 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.

Declining issues outnumbered advancers by a 3.54-to-1 ratio on

the NYSE. There were 88 new highs and 102 new lows on the NYSE.

On the Nasdaq, 1,103 stocks rose and 3,443 fell as declining

issues outnumbered advancers by a 3.12-to-1 ratio.

(Additional reporting by Niket Nishant, Sukriti Gupta and Purvi

Agarwal in Bengaluru; Editing by Shilpi Majumdar and Aurora

Ellis)