US equities pared most losses in a late-day surge on Thursday, driven by investors snapping up big-cap names and the notion that concerns about the jobs picture, which helped spur the buying of safe-haven government debt, were overblown.
New US claims for jobless benefits fell only slightly last week, according to the Labor Department, missing forecasts for a greater decline, while the prior week's number was revised up.
Some investors said the data undercut optimism about US job growth, and Federal Reserve Chairman Ben Bernanke said again that the US economy's recovery was relatively weak.
Yet a late-day surge suggested investors had second thoughts about the jobs report, which showed initial claims for state unemployment benefits fell 5,000 to a seasonally adjusted 359,000, the lowest level since April 2008.
Investors seeking to spruce up the release of their quarterly holdings also helped the major US stock indexes to rebound from losses of 1% or more.
Separately, a report on the Commerce Department's final estimate of gross domestic product showed that the economy expanded 3% in the fourth quarter, as expected.
"It's hard to take away the end-of-the-quarter price action. People are buying winning stocks, and the claims data, which was a bit shy of expectations, is still showing that we are at OK levels. That's enough to keep investors happy," said Nicolas Colas, chief market strategist at ConvergEx Group in New York.
The Dow Jones industrial average closed up 19.61 points, or 0.15%, at 13,145.82. The Standard & Poor's 500 Index fell 2.26 points, or 0.16%, at 1,403.28. The Nasdaq Composite Index slid 9.60 points, or 0.31%, to 3,095.36.
Despite the S&P 500 posting a third day in a row of declines, the benchmark index is still up 2.8% in March and nearly 12% for the year, its best start since 1998.
Caterpillar Inc and Coca-Cola Co added the most to the Dow. Caterpillar rose 1.7% to $106.02, while Coke gained 1.6% to end at $73.81 after hitting a new 52-week high of $74.39 earlier in the session.
Earlier in the day, European shares extended declines amid continued growth concerns and as technical pressure weighed on several major indexes.
The FTSEurofirst 300 index of leading European shares closed down 1.2% to at 1,059.21, while the Euro STOXX 50 was down 1.8%.
US government debt prices rose, with benchmark yields hovering at two-week lows. Nagging jitters about the euro zone's fiscal woes and a perception that the Fed might consider more stimulus to help the US economy also revived bidding.
The benchmark 10-year US Treasury note was up 13/32 in price to yield 2.15%.
The euro slid against the dollar and the yen as investors, nervous about Spain's budget presentation on Friday, dumped the single currency amid persisting concerns about the euro zone's sovereign debt crisis.
The single currency has declined steadily in recent sessions after touching a near four-week high earlier this week on comments from Bernanke, who indicated supportive monetary policy will remain in place.
The dollar fell 0.5% to 82.43 yen, according to Reuters data. The euro tumbled 0.6% to 109.65 yen, and against the dollar, the single currency fell 0.1% to $1.3314.
