Real estate services were up 3.47 percent as a group, while full line insurance fell 15 percent, as American International Group (NYSE:AFF) reported a $5.36 billion second quarter loss on continued mortgage-related write-downs, The Wall Street Journal reported.

Early Thursday, the U.S. Labor Department said jobless claims rose by 7,000 to 455,000 for the week ending Aug. 2, a six-year high, the Journal said.

The Dow Jones industrial average fell 224.64 points, 1.93 percent, to 11,431.43. The Nasdaq composite index fell 22.64 points, or 0.95 percent, to 2,355.73. The Standard and Poor's 500 slipped 1.79 percent to 1,266.07, down 23.12 points.

On the New York Stock Exchange, 742 stocks advanced and 2,388 declined on a volume of 1.281 billion shares traded.

The 10-year U.S. Treasury note rose 14/32 to yield 3.924 percent.

The euro traded at $1.5312 against Wednesday's close of $1.5412, while the dollar traded at 109.44 yen from Wednesday's 109.79 yen.

In Tokyo, the Nikkei average lost 129.90 points to 13,124.99, down 0.98 percent.

The FTSE 100 index in London fell 8.60 to 5,477.50, down 0.16 percent.