Stocks slipped on Thursday as drops in telecommunications and biotechnology stocks offset optimism about the economy spurred by a sharp fall in the number of workers filing new claims for jobless benefits.

Cisco Systems Inc , the world's largest network equipment manufacturer and a Dow component, was among the top drags in the Nasdaq as the company's gloomy revenue forecast spelled caution for investors.

The expectations had gotten a bit higher than the message (Cisco Chief Executive John) Chambers delivered, and that is carrying over from Cisco into other parts of the telecom world, said Craig Peckham, equity trading strategist at Jefferies & Co in New York.

The company's earnings and outlook, released after the close on Wednesday, overshadowed the release of government data showing initial claims for state unemployment insurance benefits fell 38,000 to a seasonally adjusted 550,000 in the week ended August 1 from a revised 588,000 the prior week.

The all-important government non-farm payrolls report, which shows the number of jobs lost in July, is due on Friday.

Financial shares, however, were lifted by positive analyst comments on Bank of America Corp , which boosted the shares 2.4 percent to $17.05. An analyst upgrade of American Express Co lifted the stock up 4.7 percent to $31.78.

The Dow Jones industrial average <.DJI> fell 10.65 points, or 0.11 percent, at 9,270.32. The Standard & Poor's 500 Index <.SPX> shed 2.63 points, or 0.26 percent, at 1,000.09. The Nasdaq Composite Index <.IXIC> was down 10.03 points, or 0.50 percent, at 1,983.02.

Shares of American International Group Inc rose 11.8 percent to $24.55. Wall Street banks and lawyers could collect nearly $1 billion in fees from the Federal Bank of New York and AIG to help manage and break apart the insurer, according to a published report.

(Additional reporting by Leah Schnurr; Editing by Padraic Cassidy)

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