By Ryan Vlastelica
NEW YORK (Reuters) - U.S. stocks fell moderately on Thursday after Ukraine's president said Russian forces had been brought into his country, returning focus to the volatile region, though the latest round of U.S. economic data pointed to improving conditions.
Worries over tension abroad had largely faded from Wall Street, with major indexes seeing few negative days over the past two weeks and both the Dow and S&P hitting records.
Ukraine's security and defense council said the border town of Novoazovsk and other parts of Ukraine's south-east had fallen under the control of Russian forces who, together with rebels, were staging a counter-offensive.
While few U.S. companies have heavy exposure to either country, investors are worried about the potential fallout from any escalation in tensions, including increased sanctions.
"The longer this situation goes on, the bigger concern it will become for the market as it is unclear how it gets resolved," said Doug Cote, chief market strategist at Voya Investment Management in New York.
An index of major shares in Europe, which has more exposure to the region, fell 0.7 percent. If European economic growth is depressed by the conflict, that could have an indirect impact on the United States. Russia's dollar-denominated RTS index slumped 3.3 percent while the Market Vectors Russia Exchange-Traded Fund fell 2.9 percent to $24.37.
The Dow Jones industrial average fell 55.55 points or 0.32 percent, to 17,066.46, the S&P 500 lost 4.36 points or 0.22 percent, to 1,995.76 and the Nasdaq Composite dropped 10.83 points or 0.24 percent, to 4,558.80.
Equities have been so strong of late that the S&P's slight decline still represents its biggest one-day drop since Aug. 7. The index has risen for 11 of the past 14 sessions, and has closed above 2,000 for the past two days. However, recent daily moves have been slight and trading volume has been among the lightest of the year.
A trio of economic reports pointed to improving conditions. The U.S. economy rebounded more strongly than initially thought in the second quarter, with gross domestic product growing by 4.2 percent. Separately, jobless claims fell for a second straight week, the latest sign of improving labor market conditions, and July pending home sales rose far more than had been expected.
"This data is so good and so strong that it raises the concern that the Federal Reserve will have to come in earlier when it comes to raising rates," said Cote, who helps oversee $215 billion.
The Federal Bureau of Investigation said it was investigating media reports that several U.S. financial firms have been victims of recent cyber attacks. JPMorgan Chase & Co said it was investigating a possible attack; shares fell 0.8 percent to $59.11.
Abercrombie & Fitch Co sank 5.2 percent to $41.73 after the retailer's second-quarter same-store sales fell more than expected. Williams-Sonoma Inc tumbled 11 percent to $66.61 a day after reporting its results and giving an outlook.
(Editing by Chizu Nomiyama and Meredith Mazzilli)