Stocks weakened on Thursday as more signals the pace of the economic recovery is slowing worried investors.

An unexpected fall in regional factory activity and a third straight month of decline in producer prices raised concerns about deflation, cooling investors' enthusiasm for the strong start to the earnings season that had lifted stocks off recent lows.

While it's only one month, to have two regional surveys on the same day that are pretty weak is not good news for the outlook for economic growth, said Linda Duessel, market strategist at Federated Investors in Pittsburgh, referring to data showing a slowdown in factory activity in New York state and the mid-Atlantic region.

The debate today is: 'Are we having soft patch? Or are we heading to a double dip?' Anything that adds more to the argument of the double dip will put pressure on the market.

Earnings from JPMorgan Chase & Co also raised concerns about major banks. Although its quarterly profit beat expectations, much of the gains came from areas that cannot be a stable source of income in the future. Its stock dipped 0.02 percent to $40.34.

Meanwhile, a broad overhaul of financial regulation was on its way to becoming law after it cleared a crucial hurdle in Congress.

The Dow Jones industrial average <.DJI> slipped 54.00 points, or 0.52 percent, to 10,312.72. The Standard & Poor's 500 Index <.SPX> was off 4.83 points, or 0.44 percent, to 1,090.34. The Nasdaq Composite Index <.IXIC> eased 10.56 points, or 0.47 percent, to 2,239.28.

But in the options market, trades on exchange-traded funds that track the S&P 500 Index indicated a short-term bullish sentiment going into options expiration on Friday.

We continue to see potential pinning of SPX to the 1100 strike, said Scott Fullman, director of derivative investment strategy at WJB Capital Group.

The S&P Depository Trust , down 0.3 percent at $109.29, was seeing pinning potential between the $107 and $110 strikes, he said.

Pinning is when a stock or index closes at or around its corresponding at-the-money option strike.

Bank stocks led the way down after JPMorgan's results. Citigroup Inc shares fell 2.4 percent to $4.11 and Bank of America Corp dropped 2.6 percent to $15.26, both ahead of their earnings on Friday. The S&P Financial Index <.GSPF> slid 0.9 percent.

Advanced Micro Devices Inc and Google Inc will both report quarterly results after the closing bell. AMD was off 0.5 percent at $7.40, while Google was flat.

Alcoa and Intel began the earnings reporting season this week with strong results.

In a busy day for economic news, the Philadelphia Federal Reserve Bank said factory activity in the mid-Atlantic region fell unexpectedly, while the New York Federal Reserve Bank said New York manufacturing hit the lowest since December 2009.

The U.S. Labor Department said the Producer Price Index declined for a third straight month. In June, the PPI fell 0.5 percent compared with the dip of 0.1 percent expected by economists polled by Reuters.

(Additional reporting by Angela Moon; Editing by Jan Paschal)