Fewer Americans filed applications for unemployment benefits last week. Initial claims for state unemployment benefits declined 11,000 to a seasonally adjusted 346,000, the Labor Department said on Thursday, showing that the labor market is continuing to gradually heal.

Separate data revealed that mortgage interest rates hit the 4 percent mark for the first time in a year. The Mortgage Bankers Association said Wednesday rates soared to 4.07 percent last week for a 30-year-fixed rate loan, up from 3.59 percent from early May.

The European Central Bank kept its main interest rate unchanged on Thursday and trimmed its forecast for the Eurozone economy in 2013. The ECB slightly lowered its economic outlook for this year, saying output would decline by 0.6 percent in 2013 but grow by 1.1 percent next year. The ECB cut its main interest rate to a new record low of 0.5 percent last month after the Eurozone remained in recession for six consecutive quarters.

All eyes are on Friday’s highly anticipated jobs report for May after Wednesday’s ADP employment report missed forecasts.  Private payroll processor ADP said Wednesday that private-sector employment increased by 135,000 jobs in May, up from 113,000 in April. Economists polled by Dow Jones Newswires expected ADP to report a 170,000 increase.

Economists look to ADP’s report on private-sector payrolls to provide some guidance on the Labor Department’s jobs report, as the ADP report showed that U.S. companies hired fewer workers than projected In May, which had economists concerned ahead of Friday’s report.

Investors are looking ahead to Friday's employment report for more signs of whether the economy is ready for the Federal Reserve to start thinking about scaling back its quantitative easing program, or $85 billion a month in bond-buying.

Economists expect the Labor Department to report an increase of 169,000 in non-farm payrolls, with an unchanged unemployment rate of 7.5 percent.

In mid-day trade, the Dow Jones Industrial Average fell 91.54 points, or 0.6 percent, to 14,869.05 at 12:49 p.m. Eastern, extending its losses a day after plummeting 217 points to close below its lowest level in a month.The S&P 500 fell 0.4 percent to 1,602.24.