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Thursday August 9, 4:44 pm Eastern Time, By Elizabeth Lazarowitz

NEW YORK, Aug 9 (Reuters) - The s??? a choppy session nearly unchanged on Thursday, as persistent fears about sluggish U.S. growth

and a mixed???l sales dampened investors' appetite for stocks.

Abercrombie & Fitch, for one, reported a bigger-than-expected drop in July sales and warned its second-half earnings would disappoint. Banks and brokerages limped lower on fears the weak stock market will hurt earnings, and tech stocks closed within a whisker of a 4-month low.

``The weak economic data and the lousy earnings season we went through have pushed hopes for recovery out further,'' said Erik

Gustafson, a portfolio manager who helps oversee $4 billion for Stein Roe & Farnham Inc. "Today's action shows a market still churning to the downside.

The economic outlook was no less grim, with jobless claims rising to 385,000 in the week ended Aug. 4 from a revised 352,000 for

the prior week. The downbeat ``beige book'' summary of regional economic conditions on Wednesday already had painted a picture of

lagging growth.

``There are all these incremental pieces of news showing that the economy is still slowing -- there's nowhere to run to and no place to hide, '' said Donna Van Vlack, director of trading at Brandywine Asset Management. The technology-heavy Nasdaq composite index dropped 3.04 points, or 0.15 percent, to 1,963.32, posting its fifth straight session of losses and ending just four points shy of a four-month closing low.

The Standard & Poor's 500 index fell 0.10 of a point, or 0.01 percent, to 1,183.43, and the Dow Jones industrial average ticked up 5.06 points, or 0.05 percent, to 10,298.56.

Worries that the weak economy and struggling stock market will bite into profits at Wall Street's biggest firms buffeted brokerage stocks, sending a key index of financial shares to its lowest level in nearly a month. The American Stock Exchange broker-dealer index fell 2.5 percent, marking its fifth consecutive day in negative territory and giving it its lowest close since July 11.

``Financial stocks are always very correlated with the markets and the markets are bad,'' said Guy Moszkowski, an analyst at Salomon Smith Barney. ``And there is a lot of macro-economic pessimism out there about when there could be a recovery.''

Morgan Stanley Dean Witter was off $2.16, or 3.7 percent, at $56.09. Trading was moderate, but picked up a bit of steam by late afternoon, with 1.1 billion shares traded on the New York Stock Exchange and 1.5 billion on the Nasdaq.

Nortel Networks Corp. slipped 6 cents to $7.56 and was the most-active stock on the NYSE. The world's largest telecommunications equipment supplier said it plans to privately sell $1.5 billion of seven-year convertible senior notes, people familiar with the sale said.

A convertible bond is a hybrid security that can be converted into company stock, potentially diluting the stock's value.

Merger news took the spotlight again, after Solectron Corp. , the world's largest electronics contract manufacturer, agreed to buy Canada's

C-MAC Industries Inc. for $2.7 billion to expand its technology, manufacturing capacity and access to the automotive market.

Based on Solectron's closing price of $17.20 on Wednesday, the deal is valued at a 33 percent premium over the Canadian company's stock at Wednesday's close. Solectron, one of the NYSE's most heavily traded shares, fell $1.71 to $15.49, while C-MAC's U.S. traded shares jumped $3.58 to $26.25.

Retailing stocks slipped as many companies unveiled their most recent sales figures. Youth-oriented apparel retailer Abercrombie & Fitch said sales dropped 14 percent from the year-ago period, more than double the drop of 4 to 6 percent analysts had expected and warned on its third- and fourth-quarter earnings. Its stock tumbled $6.15 to $29.99.

Gap Inc., the No. 1 apparel chain, said its sales fell 12 percent from a year ago, and announced it may eliminate up to 790 additional jobs to bolster profits and improve operations. Gap lost $1.57 to $25.60.

One bright spot was women's apparel retailer AnnTaylor Stores Corp., which said its sales fell 17.4 percent, but that business picked up in the last week of July. Its shares jumped $3.03 to $31.70.

``People are looking at retail sales for an indication of where the economy is going,'' said Tom Schrader, a trader at Legg Mason Wood Walker. ``And if you're seeing people shopping more at Kmart and Sears and not at Saks or Neiman Marcus, it tells you they're not so confident.''

Indeed, U.S. shoppers turned to discounters as they sought bargains on air conditioners, back-to-school items, shampoos and food, leaving

apparel and department store chains pinched by stunted sales. Wal-Mart Stores Inc., the world's largest retailer, said sales rose 6 percent in July, above its expectations, but its shares fell 36 cents to $54.17.

Among department stores, Federated Department Stores Inc. , parent of Macy's and Bloomingdale's, said sales dropped 4.2 percent. Its stock fell 63 cents to $37.37.