By Caitlin Ostroff and Paul Vigna 

U.S. stocks slipped Thursday, while Chinese stocks suffered their biggest drop in more than five months, on fresh concerns about rising coronavirus infections and the global economy's faltering recovery from the pandemic.

The Dow Jones Industrial Average fell 0.4%, the S&P 500 dropped 0.7%, and the Nasdaq Composite lost 1.4%.

After surging in April and May, the stock market's rally has slowed in recent weeks. The Nasdaq has hit new records, but the S&P 500 has been moving sideways as signs of a nascent economic recovery have been undercut by the expansion of the pandemic in the U.S.

"It's just a tug of war," said Esty Dwek, a strategist at Natixis Investment Managers. "None of these risks look like they will entirely derail the recovery or rally, but you have to get over these hurdles to get the next leg up, and right now we still have a few of these hurdles to pass."

Unless the pandemic forces a renewed total lockdown, Ms. Dwek expects the markets and economy will keep moving forward. "We're on our way to recovery," she said, "it's just not a straight line up."

Fresh figures on U.S. jobless claims showed that 1.3 million Americans filed for unemployment in the week ended July 11. The weekly tally of new unemployment claims by laid-off workers has slowly trended downward in recent weeks, but remain at historically high levels.

"The key issue now is concern about a new wave of infections and the potential impact on the economic recovery," said Andrew Hunter, senior U.S. economist at Capital Economics.

U.S. retail sales for June rose 7.5%, more than economists expected, but investors are growing increasingly concerned that further recovery could be stymied by the surge in infections. Some states are closing restaurants, bars and stores to slow its spread, and that's likely to dampen consumer spending, a crucial driver of the U.S. economy.

Among individual stocks, Norwegian Cruise Line tumbled 12% after it said it is looking to raise $925 million in debt and $250 million in an underwritten public offering of shares as its sailings have been canceled due to the coronavirus pandemic, drying up revenue.

Shares of Bank of America fell 2.4% after it reported that profit tumbled 52% in the second quarter after the bank set aside billions of dollars to prepare for soured loans.

At rival Goldman Sachs Group, traders and investment bankers posted near-record revenue on Wednesday to keep firmwide profits steady, throwing an elbow to larger commercial-bank rivals that have blamed the pandemic for poor quarterly results.

Morgan Stanley shares rose 3% after reporting second-quarter earnings rose 45%, setting a record for the firm and well above the expectations of Wall Street analysts.

Twitter's shares fell 0.7% after the social media company was hit with a widespread attack Wednesday that allowed hackers to take over an array of accounts including those of celebrities, politicians and billionaires. Shares of Dell Technologies rose 14% after the company said Wednesday it is considering a potential spinoff of its 81% equity ownership interest in VMware Inc.

In bond markets, the yield on the 10-year Treasury fell to 0.602%, from 0.629% Wednesday.

Across Asia, most major equity benchmarks ended the day down. Hong Kong's Hang Seng Index retreated 2%, while Japan's Nikkei 225 lost about 0.8%.

The Shanghai Composite Index retreated 4.5% in its steepest drop since February. Data on Thursday showed pockets of weakness, especially in China's retail sector, even as the world's second-largest economy returned to growth. Meanwhile, the pan-continental Stoxx Europe 600 declined 0.4%.

Data on China's retail sector showed it is recovering more slowly than expected, with sales falling 1.8% in June from a year earlier. Economists had projected a 0.3% growth.

Investors also said that moves in stock indexes world-wide are likely outsize due to lower trading volumes.

"We're entering a period in the summer where liquidity tends to diminish, " said Yuko Takano, a portfolio manager at Newton Investment Management. Ms. Takano said she is focusing on corporate earnings over the next few weeks to assess how corporations have fared, and expects economic data to remain choppy.

--Chong Koh Ping contributed to this article.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Paul Vigna at paul.vigna@wsj.com

(END) Dow Jones Newswires

July 16, 2020 12:11 ET (16:11 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.