US STOCKS-Wall Street drops on weak economic data
* China manufacturing contracts for 11th month
* Euro service sector posts downturn
* U.S. crude drops below $92
* Norfolk Southern sees weak shipments, shares fall
* Indexes down: S&P 0.5 pct, Dow 0.4 pct, Nasdaq 0.5 pct
By Edward Krudy
NEW YORK, Sept 20 (Reuters) - U.S. stocks fell on Thursday as data showing slowing growth in China and Europe, and weak U.S employment figures, underscored the headwinds faced by the global economy even as central banks aggressively step up stimulus measures.
The data pressured stocks at the forefront of economic activity, such as miners and energy companies. U.S. crude eased on Thursday to trade under $92 a barrel, dropping for a fourth day, while copper slipped from 4-1/2 month highs. Shares of aluminum producer Alcoa fell 1.3 percent.
"Sell on the central bank news, I continue to say for now, as the reality of slowing economic and earnings growth, that was swept under the rug for a few months, pops back out again over the next month," Peter Boockvar, equity strategist and portfolio manager at Miller Tabak in New York said in a note.
Manufacturing in China contracted for an 11th straight month in September, according to a private sector survey of factory managers; in the euro zone, a downturn in activity in the service sector steepened this month at the fastest pace since July 2009.
The number of Americans filing new claims for jobless benefits fell last week, but from an upwardly revised number the prior weak, with the underlying tone of the report pointing to some weakening in the labor market.
Shares of railroad company Norfolk Southern Corp dropped 6.8 percent to $67.74 after it said weaker shipments of coal and merchandise as well as lower fuel-surcharge revenue would reduce its third-quarter earnings compared with a year earlier.
The Dow Jones industrial average dropped 50.18 points, or 0.37 percent, to 13,527.78. The Standard & Poor's 500 Index fell 6.74 points, or 0.46 percent, to 1,454.31. The Nasdaq Composite Index lost 16.77 points, or 0.53 percent, to 3,165.85.
Market losses were relatively light, with the S&P 500 having rallied 7 percent since early August, reflecting a belief that monetary easing in the form of bond buying by the Federal Reserve and the European Central Bank will support the market.
"The weaker than expected PMI data across much of the globe is setting the tone right now," said Ryan Larson, head of equity trading at RBC Global Asset Management in Chicago.
"But keep in mind that as we have seen over the last several weeks and several months now ... any meaningful losses have been somewhat back-stopped by the fact that the Fed and the ECB are going to be there with additional policy measures."
UBS raised its target level for the S&P 500 by the end of 2012 to 1,525 from 1,375 Thursday, saying equity markets will climb after aggressive monetary easing by central banks.
"Over the short run, we believe that the 'risk on' trade will continue, with a rotation into the most volatile and economically sensitive stocks," said UBS's chief U.S. equity strategist Jonathan Golub in a research note.
Bank of America Corp is planning to cut 16,000 jobs by year-end as it speeds up a company-wide cost-cutting initiative amid declining revenues, the Wall Street Journal reported on Wednesday. The bank's shares fell 1.6percent to $9.14.
Initial claims for state unemployment benefits slipped 3,000 to a seasonally adjusted 382,000. The prior week's figure was revised up to show 3,000 more applications than previously reported.
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