Stocks were on track for a third day of losses on Thursday after jobless claims data failed to meet heightened market expectations as stocks come off their best first quarter in 14 years.

New U.S. jobless claims fell to a 4-year low last week but still missed forecasts, while the prior week's number was revised up. After a period of improvement, analysts said the report showed signs of stalling, a worry for investors.

The data today is evidence that we're not going to have the robust recovery we had been expecting. The economy is growing, and the labor market is healing, but both on a very slow basis, said Michael Yoshikami, chief executive officer at Destination Wealth Management in Walnut Creek, California.

Separately, U.S. household income grew at a faster pace in the fourth quarter than previously thought, which should help underpin spending this quarter.

The S&P 500 is up 10.9 percent this quarter, its best start to the year since 1998 and its best quarter since the third period of 2009.

Some analysts are looking for a market pullback early in the second quarter after the strong early run as investors seek confirmation the economy is not about to slow.

We've had an incredible rally, and in order for us to keep moving up, we're going to need data that is very strongly positive, not just lukewarm, Yoshikami said.

The Dow Jones industrial average <.DJI> dropped 82.91 points, or 0.63 percent, at 13,043.30. The Standard & Poor's 500 Index <.SPX> was down 13.25 points, or 0.94 percent, at 1,392.29. The Nasdaq Composite Index <.IXIC> slid 31.86 points, or 1.03 percent, at 3,073.10.

All ten S&P sectors fell, with financials <.GSPF>, a group closely tied to economic growth prospects, down 1.8 percent. Wells Fargo & Co fell 2.2 percent to $33.70.

The S&P is off only 0.1 percent this week, with the day's decline erasing a strong rally on Monday.

Best Buy Co Inc fell nearly 10 percent to $24.08 and was the biggest decliner on the S&P 500. The electronics retailer reported weaker-than-expected sales, and said it will close 50 big-box stores and cut 400 jobs.

Illumina Inc rose 4.4 percent to $52.07 after Roche Holding AG hiked its offer for the U.S. gene sequencing company in hopes of winning over Illumina shareholders before the annual meeting next month.

Red Hat Inc soared 14.4 percent to $58.79 after the business software maker's profit beat expectations for the fifth straight quarter.

Fossil Inc will replace Medco Health Solutions Inc in the S&P 500 as Express Scripts Inc acquires Medco in a deal expected to be completed soon. The date of the index change has yet to be announced.

(Editing by Jeffrey Benkoe)