US STOCKS-Wall St drops on economic, profit jitters

(Updates to early morning)

By Ellis Mnyandu

NEW YORK, Feb 28 (Reuters) - U.S. stocks fell on Thursday as recession fears mounted and the profit outlook turned gloomier following data that showed sluggish economic growth and a jump in workers' claims for unemployment benefits.

Shares of financial services companies, including insurer American International Group Inc (AIG.N: Quote, Profile, Research) and No. 3 U.S. bank JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), led declines following signs pointing to further deterioration in the credit and mortgage markets.

Two brokerages cut their earnings estimates for JPMorgan, whose stock declined more than 2 percent.

Sprint Nextel Corp (S.N: Quote, Profile, Research) tumbled more than 8 percent after the No. 2 U.S. mobile phone company posted a $29.45 billion quarterly loss and scrapped its dividend. For details, see [ID:nN28541756].

The latest reports on gross domestic product and jobless claims revived uncertainty about companies' profit outlook, which rely on investment by businesses and consumer spending. [ID:nN28549245].

"The market is unlikely to move substantially higher than 1,400 on the S&P 500 until we get some clarity on first-quarter earnings reports," said Gail Dudack, Chief Investment Strategist, Dudack Research Group in New York.

The Dow Jones industrial average .DJI was down 79.21 points, or 0.62 percent, at 12,615.07. The Standard & Poor's 500 Index .SPX was down 7.06 points, or 0.51 percent, at 1,372.96. The Nasdaq Composite Index .IXIC was down 9.63 points, or 0.41 percent, at 2,344.15.