Stocks rebounded from earlier losses to finish narrowly mixed Thursday, with the S&P adding small gains to the New Year rally, ahead of a key government employment report.
Stocks had been under pressure earlier in the session amid ongoing jitters over the European debt crisis and a decline in the euro to its lowest level since September 2010.
The Dow Jones Industrial Average slipped 2.72 points, or 0.02 percent, to close at 12,415.70, erasing most of its 134-point decline earlier.
BofA and JPMorgan led the blue-chip winners, while Boeing lagged.
The S&P 500 edged up 3.76 points, or 0.29 percent, to end at 1,281.06. The Nasdaq jumped 21.50 points, or 0.81 percent, to finish at 2,669.86.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, finished below 22.
Financials were the biggest gainers among the S&P sectors, while energy slumped.
“The road to recovery in Europe continues to be bumpy and if we see a domino effect there, investor and consumer confidence in the U.S. will tank,” said Mike Schenk, VP of Economics at CUNA.
The euro dropped below $1.28 against the U.S. greenback for the first time since September 2010as markets refocused on concerns about the euro zone debt crisis. Investors continue to be skeptical over European banks' ability to raise capital amid the region's debt crisis.
European banks declined sharply, including Unicredit, Deutsche Bank and Credit Suisse .
A French debt auction got decent demand but yields edged up, reflecting concerns that France may lose its triple-A credit rating.
That followed a mediocre German bond auction on Wednesday, with Berlin attracting only slightly better demand than was seen at a disastrous sale last year.
Meanwhile, Hungary pledged to seek a fast agreement with international lendersto shore up its financial markets as the nation's currency and bonds fell further due to the government's widely-criticized policy course.
“We’ve had a lot of really good economic news over the past couple of months, but what troubles me most is that we do face a lot of uncertainty volatility going forward from Europe,” said Schenk. “Europe will continue to be a drag on economic growth this year, but won’t necessarily drag us into a recession.”