* Jobless claims unexpectedly fall, U.S. Sept. exports rise
* McDonald's drops after reporting lower Oct. global sales
* Qualcomm rises after revenue tops view, Whole Foods falls
* ECB holds main interest rate steady at 0.75 percent
* Dow off 0.6 pct, S&P 500 off 0.8 pct, Nasdaq down 0.9 pct
By Chuck Mikolajczak
NEW YORK, Nov 8 (Reuters) - U.S. stocks extended losses on Thursday, with the Nasdaq briefly dropping 1 percent, as investors recalibrated f o r upcoming negotiations over the "fiscal cliff," which overshadowed a batch of positive economic data.
Investors worry that if no deal is reached in Congress over some $600 billion in spending cuts and tax increases due to kick in early next year, it could derail the U.S. economic recovery and lead to a recession.
Data released on Thursday showed a better-than-expected drop in initial jobless claims and a rise in exports, news that had earlier been expected to bolster equity markets after steep declines a day earlier.
The three major U.S. indexes shed more than 2 percent Wednesday as investor focus returned to Europe's economic troubles and the looming fiscal cliff following the re-election of President Barack Obama.
Anticipated haggling over spending cuts and taxes has added a layer of uncertainty for investors, who have sold stocks that may leave them susceptible to higher taxes on dividends.
"How does an investor adapt to the new tax regime and the potentially lower after-tax return on some of these assets, some of these stocks? They react by selling," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
While a comprehensive legislative agreement to avoid the fiscal cliff was possible, the more likely scenario would be for political leaders to find a temporary fix in order to buy time until a new Congress and the re-elected president are sworn in at the start of the new year.
Data showed the U.S. trade deficit narrowed in September as exports rose while jobless claims dropped, although last week's damaging storm along the U.S. East Coast may have distorted the data.
An analyst from the Labor Department said Hurricane Sandy boosted claims in some states by leaving people out of work, but reduced claims in at least one state because power outages kept it from collecting claim reports.
McDonald's Corp dropped 2 percent to $85.11 as one of the Dow's worst performers after the world's largest hamburger chain reported a 1.8 percent drop in October sales at established restaurants around the world, its first monthly sales fall since March 2003.
The Dow Jones industrial average dropped 74.73 points, or 0.57 percent, to 12,858. The Standard & Poor's 500 Index lost 10.64 points, or 0.76 percent, to 1,383.91. The Nasdaq Composite Index fell 25.19 points, or 0.86 percent, to 2,912.08.
The S&P 500 bounced off its 200-day moving average of 1,380.74, but managed to find support around that key level.
Wednesday's retreat marked the biggest daily drop for the S&P 500 since June 1. Despite that selloff, the benchmark S&P 500 is still up nearly 10 percent so far this year.
Qualcomm Inc, was a bright spot, up 6 percent at $61.61 as the biggest boost to both the S&P 500 and the Nasdaq 100 after the leading supplier of chips for cell phones reported quarterly revenue Wednesday that beat expectations.
Whole Foods Market Inc reported earnings that met expectations, but said Sandy was a drag on sales this quarter. Its shares slid 5 percent to $91.17.
According to Thomson Reuters data through Thursday, of the 440 companies in the S&P 500 that have reported earnings, 63.4 percent have topped analysts' expectations, slightly above the 62 percent average since 1994, and the 67 percent beat rate over the past four quarters.
But revenue results remain disappointing, with only 37.6 percent of companies topping expectations - well below the 62 percent average since 2002, and the 55 percent beat rate over the past four quarters.
The European Central Bank held its main interest rate at 0.75 percent despite dovish comments on Wednesday from ECB President Mario Draghi that had stirred market rumors of a rate cut. The U.S. dollar's rise also weighed on stocks on Wednesday.
Europe will keep the pressure on equities. Draghi said the ECB cannot do much more to help Greece with its debt burden, and gave Spain none of the assurance it wants that ECB bond buying will lower its borrowing costs.