At around 1430 GMT the Dow Jones Industrial Average was down 103.53 points (0.91 percent) to 11,217.18.
The broader S&P 500 shed 10.00 points (0.85 percent) to 1,167.60, while the tech-rich Nasdaq Composite lost 25.71 points (1.04 percent) to 2,441.98.
The drops came after three straight days of gains, with an unexpectedly poor report on weekly jobless claims on Thursday casting a new shadow over the economy.
Initial US jobless claims surged to 417,000 in the week to August 20 from a revised 412,000 the previous week, well above the four-week moving average of 407,500.
The Dow would have fallen further but for Bank of America, which after weeks of rumors that it needed new capital announced said that investment wizard Warren Buffett's Berkshire Hathaway will buy $5 billion in preferred shares in the company.
BofA shares jumped 17.2 percent after having lost nearly 40 percent in the month to Wednesday on shareholder doubts of its financial strength.
Apple shares were down only 1.6 percent despite the departure as chief executive of Jobs, whose visionary leadership is deeply linked with the company's hit products like the iPhone and iPod.
The company said Jobs, whose health has suffered in recent years, would remain involved as chairman of the board of directors.
The Street's bigger concern was the news that Jobs has resigned, she said.
"The resignation has sent shockwaves through the Street, as investors assess the future of (Apple) sans Jobs, who helped make the tech firm the second-most valuable corporation in the world," said Sarah Wasserman at Shaeffer's Investment Research.
Bond prices rose a day before US Federal Reserve Chairman Ben Bernanke is slated to give a key speech that might reveal plans to boost the economy via government bond purchases.
The yield on the 10-year Treasury note fell to 2.21 percent from 2.26 percent late Wednesday, while that on the 30-year bond eased to 3.6 percent from 3.61 percent.
Bond prices and yields move in opposite directions.
Copyright AFP (Agence France-Presse), 2011