Stocks rebounded from earlier lows, but wavered ahead of the close Thursday ahead of the government's monthly jobs figure and after EU officials said no agreement has been reached on additional funding for Greece.
The Dow Jones Industrial Average was down almost 30 points, after plunging more than 2 percent on Wednesday.
Among Dow components, Wal-Mart and Chevron traded lower while Bank of America and Caterpillar rose.
The S&P 500 and the tech-heavy Nasdaq turned mixed. The CBOE Volatility Index, widely considered the best gauge of fear in the market, turned lower to trade near 18.
Among key S&P sectors, industrials and financials gained, while consumer staples and telecoms slipped.
Moody’s warned that the U.S. rating could be placed under review for a possible downgradeif lawmakers in Washington do not make substantive progress in budget talks by the middle of July.
The dollar slipped against a basket of currencies while the euro touched a one-month high.
Meanwhile, Greece agreed with its EU and IMF lenders to impose yet deeper austerity, a senior official told Reuters, but a euro zone official later told CNBC there is no truth to the Reuters report. A Greek official declined comment.
The market tried to find its footing after a sharp selloff in the previous session triggered by news of unexpected weakness in the manufacturing sector and a smaller-than-expected gain in private payrolls, and compounded Moody's downgrade of Greece's debt deeper into junk status.
Further signs of weakness emerged as jobless claims fell less than expectedThursday, and retailers offered a mixed report on May same-store sales. But most investors were awaiting the May's jobs report on the government due Friday for a clearer picture of the economy's health.
"Leading into the unemployment data tomorrow, investors are very concerned the numbers are going to be worse than expected," said Jonathan Corpina, senior managing partner, Meridian Equity Partners. "I think the bar is set really, really low for tomorrow."
The government is expected to report that employers hired 150,000 last month, according to a Reuters survey, after increasing payrolls by 244,000 in April.
Volume was also light, which Corpina said will add to volatility for the rest of the session. Unless some news emerges that prompts investors to buy, "the people who didn't sell out yesterday will continue to sell out today," he said.