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Stocks eased off their lows but were still sharply in the red Thursday, with major indexes having their biggest one-day drops since June, as investors digested a batch of disappointing earnings reports and a handful of mixed economic data. The market continued to gauge when the Federal Reserve might start to reduce its asset purchases.

The 10-year yield jumped to 2.82%, its highest level in two years.

"A lot of uncertainty creates volatility," said Todd Salamone, director of research at Schaeffer's Investment Research. "We had some bellwether names with disappointing earnings, and economic data that sparked tapering worries. We also broke below a support level on the S&P 500 at 1,685, which is the level where we entered August and the peak back in May."

The Dow Jones Industrial Average ($INDU) tumbled 200 points, dragged by Cisco (CSCO), extending losses a day after logging its first triple-digit loss since June. The blue-chip index is on track for its biggest weekly drop in nearly four months.

The S&P 500 ($SPX) and the Nasdaq (@CCO) also fell more than 1% each. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, shot above 14.

All key S&P sectors were firmly in negative territory, led by techs and financials.

On the economic front, New York state's manufacturing sector growth slowed to 8.24 in August from 9.46 in July, according to the latest report from the New York Federal Reserve. Economists had projected a reading of 10. A reading above zero indicates expansion in the sector.

And industrial production was unchanged in July as a decline in manufacturing output and utilities counteracted an uptick in mining activity, according to the Federal Reserve. Economists polled by Reuters had expected a gain of 0.3%.

Consumer prices edged up 0.2% in July, matching expectations, according to the Labor Department.

On the upside, weekly jobless claims fell 15,000 to a seasonally adjusted 320,000, hitting the lowest level in nearly six years, according to the Labor Department. Economists polled by Reuters had expected a reading of 335,000.

And homebuilder confidence rose near an eight-year high in August, according to the National Association of Home Builders. The NAHB/Wells Fargo Housing Market index rose to 59, the fourth-consecutive monthly gain. Analysts had expected a reading of 56.

Earlier, St. Louis Fed President James Bullard reiterated his comments from Wednesday that the central bank should wait for further evidence that the economy is firming before winding down its asset-purchase program.

"The committee still needs to see more data on macroeconomic performance from the second half of 2013 before making a judgement in this matter," Bullard said in remarks prepared for delivery to a breakfast event hosted by the St. Louis Fed.

Among earnings, Wal-Mart Stores (WMT) declined after the world's largest retailer reported disappointing quarterly and cut its revenue and profit forecasts for the year.

Kohl's (KSS) climbed even after the department store chain forecast current-quarter earnings below expectations after reporting a decline in second-quarter profit.

Cisco Systems posted earnings and revenue that edged above Wall Street expectations but shares tumbled heavily after the network equipment maker said it would cut 4,000 jobs in the face of uncertain demand for its products.

Dell (DELL), Applied Materials (AMAT) and Nordstrom (JWN) are among notable companies slated to post earnings after the closing bell.

Billionaire investor Warren Buffet's Berkshire Hathaway sharply reduced its holdings of Kraft Foods (KRFT) and Mondelez (MDLZ) during the second quarter, according to Berkshire's quarterly filing with the SEC. Kraft Foods and Mondelez were created by a split up for Kraft Foods last October.

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Meanwhile, Berkshire raised its stake in automaker General Motors (GM) to 40 million shares and reported a new stake in satellite television provider Dish Network (DISH) of nearly 550,000 shares, worth approximately $24 million.

Apple (AAPL)slid below $500 after closing above the level on Wednesday for the first time since January.

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