U.S. stocks swung between slight gains and losses as government bonds slipped and oil cracked $50 a barrel for the first time since June.
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Some traders said early declines led by health-care shares were mitigated by fresh hopes that the European Central Bank was holding course on easy money policies.
The moves came as data showed U.S. jobless claims near a four-decade low. A strong employment report Friday could reassure investors that the U.S. economy remains on track, while bolstering the case for the Federal Reserve to raise interest rates in December.
The Dow Jones Industrial Average fell 15 points, or less than 0.1%, to 18266. The S&P 500 gained 0.1%, and the Nasdaq Composite declined 0.1%.
U.S. government bonds fell for a fifth consecutive session as a report showed the number of Americans applying for first-time unemployment benefits, a proxy for layoffs, decreased by 5,000 to a seasonally-adjusted 249,000 in the week ended Oct. 1, according to the Labor Department. That is the smallest figure since mid-April, when claims hit a near 43-year low.
Bonds sold off earlier in the week following a media report that the ECB might begin tapering, which the central bank subsequently denied. ECB policy makers warned at their September meeting of "increasing challenges" in sourcing bonds for its quantitative easing program, and hinted that the program could be expanded again.
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The yield on the 10-year German government bond was minus-0.004% on Thursday, according to Tradeweb, while the yield on 10-year U.S. Treasurys reached 1.735% from 1.718% Wednesday. Yields rise as prices fall.
The Stoxx Europe 600 index fell 0.4%. Banks were the biggest gainers in Europe, while the real-estate sector -- which tends to perform best in a period of ultralow-interest rates -- was the worst performer.
Investors remain divided on the prospect of higher U.S. rates this year.
"The Fed is walking a tightrope," said Neil Mellor, currency strategist at BNY Mellon. Following recent speeches by U.S. Federal Reserve officials and stronger-than-expected economic data, some investors are thinking that "perhaps the moment of reckoning is nigh where monetary largess is withdrawn and risk assets will get hit," he said.
Federal Reserve Bank of Richmond President Jeffrey Lacker said on Wednesday that current economic conditions provide a "strong case" to raise short-term interest rates "more rapidly."
Fed-fund futures, which traders use to place bets on central bank policy, showed a roughly 64% chance of rate increase by December, according to CME Group.
Energy shares in the S&P 500 edged 0.3% higher, a day after a climb in oil prices and upbeat data on the U.S. services sector bolstered stocks. U.S. oil was last up 1% at $50.31 a barrel.
Health-care stocks in the S&P 500 fell 0.6% and the Nasdaq Biotechnology Index slid 2.3% after Alnylam Pharmaceuticals Inc. said Wednesday it had discontinued development of a rare-disease treatment. Shares of Alnylam dropped 48% Thursday.
Fallout from the Alnylam announcement means "everybody's going to sell and let it all wash out," said Christian O'Brien, who trades health-care stocks at Raymond James.
Gold fell to a three-month low as the WSJ Dollar Index rose 0.5%.
In currencies, the British pound fell 0.9% against the dollar to $1.2647. From here, "It's just a question of how far it can fall," Mr. Mellor said, given rising concerns about the U.K.'s future access to the single market.
The euro was down 0.4% against the dollar at $1.1162, while the dollar rose 0.5% against the yen.
Harriet Torry and Tom Fairless contributed to this article