* National factory activity data disappoint investors
* Jobless claims rise in latest week
* Microsoft, Cisco drag technology shares down
(Updates to midday, changes byline)
By Chuck Mikolajczak
NEW YORK, Oct 1 (Reuters) - U.S. stocks dropped on Thursday after the latest jobs and manufacturing data extended a string of lackluster economic figures and raised concerns about the strength of the economic recovery.
The September manufacturing data, added to worse-than-expected jobless claims released before the bell, overshadowed more positive reports on construction spending and pending home sales.
The Institute of Supply Management's manufacturing reading fell to 52.6, below economists' forecast of 54.0 and August's 52.9.
Major U.S. stock indexes fell more than 1 percent, with the Nasdaq down more than 2 percent.
The data could portend a poor reading on the all-important September nonfarm payrolls number due Friday, the month's biggest data release.
"(The drop is) sort of the sell-off everybody was looking for," said Kevin Kruszenski, head of listed trading at KeyBanc Capital Markets in Cleveland. "The data just hasn't been very good, which sort of foreshadows into tomorrow."
The Dow Jones industrial average dropped 144.96 points, or 1.49 percent, to 9,567.32. The Standard & Poor's 500 Index fell 19.64 points, or 1.86 percent, to 1,037.44. The Nasdaq Composite Index lost 50.35 points, or 2.37 percent, to 2,072.07.
Technology stocks were among the worst performers. Microsoft Corp fell 2.8 percent to $25.00 after Goldman Sachs removed the stock from its Americas Conviction Buy list, saying Microsoft may have one more soft quarter.
Cisco Systems Inc shares shed 1.5 percent to $23.18 after it agreed to buy Norwegian video conferencing company Tandberg for $3 billion in cash.
The NYSEArca Network index slid 3.1 percent.
Penske Automotive Group Inc shares dropped 16.5 percent to $16.02 after the company terminated talks with General Motors Co to buy the Saturn brand.
Comcast Corp lost 7.5 percent to $15.61 after sources close to the company's negotiations said the cable service company is in talks with General Electric Co that could lead to the sale of part or all of NBC Universal, which is jointly owned by GE and Vivendi.
GE dipped 2.1 percent to $16.07.
Bank of America Corp shares slipped 0.3 percent to $16.86 after Chief Executive Ken Lewis said he was retiring after months of being dogged by a series of government investigations into the company's acquisition of Merrill Lynch. The company did not name a successor.