Stocks indexes dropped at midday, then recovered to about breakeven in afternoon trading. At lunchtime they followed European markets lower after European Central Bank President Mario Draghi signaled that the bank wouldn't take more steps to shore up Europe's ailing economy. The dollar sank against the euro and the yen, leading to price swings in other markets.
A drop in claims for unemployment benefits helped nudge the market up in morning trading, but the gains quickly faded. Traders said markets were likely to take sudden swings as they positioned for the government's monthly employment report on Friday.
The Dow Jones industrial average edged up 13 points to 14,974, or 0.1 percent, as of 2:56 p.m. It had been down as much as 116 points in the early afternoon.
Financial markets have turned volatile over the past two weeks as traders parse comments from Federal Reserve officials and economic reports for hints about when the bank will cut back on its support for the economy.
The Dow is coming off two days of losses. The index has managed to go without a losing streak of three days or greater since December 28, a record 108 trading days, according to Schaeffer's Investment Research.
A batch of weak economic reports sent the stock market plunging to its lowest level in a month on Wednesday. The Dow had its biggest one-day loss in seven weeks and closed below 15,000 for the first time since May 6.
One change traders are reacting to is a recent increase in long-term interest rates. Those rates will likely climb further as the economy improves and the Fed scales down its monthly purchases of $85 billion in bonds. Rates remain near historically low levels.
"As interest rates come back to more normal levels, it's probably going to cause volatility," said Tim Speiss, chairman of the personal wealth advisers practice at EisnerAmper. "But that should be viewed as healthy."
In the market for U.S. government bonds, the yield on the 10-year Treasury note edged down to 2.07 percent from 2.09 percent late Wednesday.
The yield, which is a benchmark for many kinds of loans including home mortgages, has been rising steadily from a recent low of 1.63 percent since May 3, when the government reported a surge in hiring over the previous three months. Expectations that the Fed will ease back on its bond purchases sometime soon is also prompting investors to sell bonds, pushing yields higher.
In other U.S. stock trading, the Standard & Poor's 500 index rose four points to 1,613, an increase of 0.3 percent. The Nasdaq composite rose four points to 3,406, or 0.1 percent.
In Europe, government bond yields rose and stock indexes fell after the European Bank chief said the bank wouldn't take more action to prop up the region's economy.
The yield on Spain's 10-year government bond spiked to 4.65 percent from 4.41 percent as demand for the bonds dropped. Stock markets fell 2.6 percent in Italy, 1.2 percent in Germany and 1 percent in France.
Gold rose $17.30 to $1,415.80 an ounce. The price of crude oil crossed above $95 per barrel following a report from the Energy Department that the country's oil supply shrank last week. Oil settled up $1.02 to $94.76 a barrel.
Early Thursday, the Labor Department said that the number of Americans applying for unemployment benefits fell by 11,000 last week to 346,000, a level that's consistent with steady job growth.
Speiss called the drop in claims, which tend to fluctuate sharply week to week, a "good sign." However Speiss said it's far from certain that the government's monthly employment survey will give investors anything to cheer on Friday. Economists predict that employers added 170,000 jobs last month. A report that's much better or worse than expected can drive trading for weeks afterward.
Last month, for instance, news that the unemployment rate dropped to 7.5 percent, a four-year low, pushed the S&P 500 above 1,600 for the first time.
David Joy, chief market strategist at Ameriprise Financial, said Friday's report is especially important for investors because the Fed has made it clear that the job market will determine whether the bank pulls back on or extends its bond-buying effort.
"We're in a battleground between what the Fed is going to do and what the economy is going to do, and there's no clear direction on either," he said.
Among other stocks making big moves:
L Brands, the owner of Victoria's Secret and Bath and Body Works, fell $1.16, or 2.2 percent, to $50.50. The company reported sales growth in May that came in below financial analysts' estimates.
VeriFone Systems plunged 18 percent. After the market closed Wednesday, the provider of terminals for credit-card payments reported quarterly results that fell short of financial analysts' estimates. The lower results were a result of a charge for legal fees and sliding sales. VeriFone also forecast earnings of 20 cents in the current quarter, half of what analysts had forecast. The company's stock sank $4.02 to $17.95.