Global stocks eked out gains on Thursday while the euro fell as data suggested Europe's debt woes were spreading and worsening a global economic slowdown, adding to investor concerns about Greece's possible exit from the euro zone.
In a volatile session, investors looking for bargains initially bought equities, oil and gold, which have been beaten down this week by worries a Greece exit would deepen the euro zone debt crisis.
The appetite for growth-oriented assets faded as fears about the euro zone's drag on the world economy returned. Then for a second straight day, a wave of buying emerged shortly before Wall Street's close.
"The market has pulled back far enough that people are trying to assess if we've priced the worst of what's known. But with the problems in Europe and the fact the news isn't reassuring, prices are still somewhat soft," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.
Speculation of more coordinated efforts from major central banks to stem further deterioration of the euro zone debt crisis helped steady the yields on bonds of Spain, Italy and other weaker euro zone members. Still, the yields remained at levels considered unsustainable, and this moderated the safe-haven appetite for US and German government debt.
"We are just being buffeted around by despair and hope of the possible solution to the euro zone crisis. Risk appetite is still at a very low level, but there is plenty of value," said Robert Parkes, equity strategist at HSBC in London.
The Dow Jones industrial average closed up 33.60 points, or 0.27%, at 12,529.75. The Standard & Poor's 500 Index finished up 1.82 points, or 0.14%, at 1,320.68. The Nasdaq Composite Index ended down 10.74 points, or 0.38%, at 2,839.38.
The late bounce in US stocks pushed the MSCI world equity index back above 300 points. It ended up 0.3% following Wednesday's 1.2% drop.
The MSCI world index was buoyed earlier on a rebound in European shares. The FTSEurofirst 300 index of top European stocks closed up 1.1% at 982.61 after slipping 2.2% in choppy trade on Wednesday.
In Tokyo, the Nikkei index closed up 0.1% at 8,563.38.
US, CHINA NOT IMMUNE
Data showing further slowing in factory growth in China and the United States alarmed investors as it showed the world's two largest economies might not be able to escape the drag from the euro zone's fiscal problems.
"It is clear that the United States will not decouple with anyone else. The market is not driven by data but events from across the ocean," said Yelena Shulyatyeva, US economist at BNP Paribas in New York.
The euro hovered above two-year lows in reaction to weak factory and business sentiment data in Germany, the euro zone's most powerful economy.
The euro last traded down 0.4% at $1.2534 after falling to $1.2514, near a two-year low. It is down nearly 3.2% on the year versus the dollar.
While the euro extended its slump, the dollar resumed its rally against major currencies. The dollar index was last up 0.2% at 82.276 after touching a 20-month high at 82.376.
A summit on Wednesday of European Union leaders, who have been advised by senior officials to prepare contingency plans in case Greece decides to quit the currency bloc, was unable to shed new light on what euro zone nations plan to do.
As a result, 10-year German government bond yields fell to a record low of 1.35% before moving higher with a drop in peripheral debt yields.
The yield on 10-year Spanish government debt held steady at 6.15%, while the yield on 10-year Italian government notes dipped 1 basis point to 5.72%.
Yields on US government debt, which have flirted with historic lows on intense demand for safe assets, rose on jitters about bidding on $29 billion worth of new seven-year debt.
While overall demand for the new seven-year notes was solid, the yield came in slightly above expectations even though it was the lowest ever at an auction, at 1.203%.
With expectations that global interest rates will likely hold at rock-bottom levels for a protracted period, investors have sought higher-yielding bonds without taking a great deal more risk. For borrowers, this is an opportune time to lock in long-term funding at these low rates, analysts said.
United Technologies launched the year's biggest investment-grade deal so far, worth $9.8 billion, according to IFR, a unit of Thomson Reuters.
Benchmark 10-year Treasury notes were last down 11/32 in price, yielding 1.77%, up 4 basis points on the day. The 10-year yield is only 10 basis points above the lowest level seen in at least 60 years.
In the oil market, prices recovered from the prior day's losses as talks between world powers and Iran over its nuclear program hit a snag, stirring fears of supply disruption and a new Mideast conflict.
July Brent futures settled up 99 cents, or 0.94%, at $106.55 a barrel, a day after they fell near their lowest in five months. US oil futures settled 76 cents, or 0.85%, higher at $90.66 a barrel after hitting the lowest since November 1 on Wednesday.
Spot gold ended little changed in a volatile trading session as the euro faltered in afternoon trading and the dollar resumed its rally. Bullion prices last traded up 0.1% at $1,560.16 an ounce.