Stocks flop: Dow hits lowest level since May 20

Stocks fell Thursday as investors continued to worry about rising global tensions despite reports of an improving U.S. economy.

The Dow Jones industrial average ended down 75 points, or 0.5%, to 16,368. The Standard & Poor's 500 index fell 0.6% to 1910 and the Nasdaq composite index closed down 0.5% to 4335.

For the Dow, it's the lowest level for the blue-chip index since May 20. And the index is now a steep 4.5% off its July 16 peak of 17,138.20.

In another sign of investors' rising risk aversion, the yield on the 10-year Treasury, now at 2.42%, hit its lowest point in more than a year -- since June 19, 2013, to be exact. That means that prices on the benchmark bonds -- which move in the opposite direction of yields -- have climbed considerably.

The latest global crisis came as the U.S. said it is considering possible airstrikes to assist trapped minorities on a mountain surrounded by Islamic militants in Iraq.

The drop came even after another report showed strength in labor market as weekly applications for unemployment benefits fell 14,000 to a seasonally adjusted 289,000.

But as the economy picks up steam, many investors are worried the Federal Reserve will begin raising interest rates sooner than anticipated.

The situation between Russia and Ukraine continues to weigh on market sentiment as Russia announced it is imposing a food import ban in retaliation for U.S. and European sanctions.

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Overseas, European stocks were lower. Earlier, Europe's main two central banks decided to keep interest rates on hold despite ongoing tensions over the crisis in Ukraine and fresh Russian sanctions on the West.

Britain's FTSE 100 index was down 0.6% to 6597.37 and Germany's DAX dropped 1% to 9038.97.

"The situation in Russia remains a real concern for the ECB and with the eurozone economy in its current state of stagnation, it may only be a matter of time before further monetary stimulus is introduced," said Dennis de Jong, managing director of UFX.com.

Japan's Nikkei 225 index rose 0.5% to 15,232.37 but other major benchmarks in the region declined with Hong Kong's Hang Seng index falling 0.8% to 24,387.56.

Wednesday, stocks cut early losses to finish a tad above the break-even point as Wall Street tentatively shook off global worries about Russia-Ukraine tensions and halted the recent market sell-off.