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Financial companies led the Dow back from a triple-digit retreat on Thursday as traders shook off concerns about Europe's banking crisis, although the blue-chip average still snapped a two-day rally.
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The Dow Jones Industrial Average fell 2.72 points, or 0.02%, to 12416, the S&P 500 rose 3.8 points, or 0.29%, to 1281 and the Nasdaq Composite rose 21.5 points, or 0.81%, to 2670.
Bank of America (NYSE:BAC) was the best-performing component on the Dow by a wide margin, leaping more than 8% on the day. JPMorgan Chase (NYSE:JPM), the nation's biggest bank by assets, rallied as well, tacking on more than 2%. Other large financial institutions fared well too: Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C) both climbed better than 1%.
Boeing (NYSE:BA), Chevron (NYSE:CVX), United Technologies (NYSE:UTX), and Alcoa (NYSE:AA) fell the most out of the blue chips. The former three had a particularly strong affect on the Dow's overall performance because of their high price point relative to the advancers.
A round of upbeat data on the labor market helped boost sentiment on Wall Street, but lingering concerns about Europe acted as a counterbalance.
Central to the worries on the European front have been the painful borrowing costs numerous major euro zone countries have had to pay on the private markets. Italy, the bloc's third-biggest economy, has been in the spotlight because it needs to finance billions of euros in debt this year, but is being forced to pay what many analysts see as unsustainable yields.
The country's benchmark 10-year note recently yielded 7.08%, while investors demanded a 5.21-percentage point premium to purchase the country's paper over the safe-haven German bund. The rising yields are an indication that bond prices are falling, which has, in turn, weighed on European banks' balance sheets that are heavy on sovereign debt.
In a sign of how the debt crisis is hitting banks, Italy's biggest lender lender, UniCredit, has seen its shares plunge 29.2% over the past two sessions as it had to discount a rights offering to drum up demand.
"It's almost the 2008 banking crisis all over again," said Manoj Ladwa, a senior trader at ETX Capital in London, referring to the events that took place following the collapse of investment-banking titan Lehman Brothers that year, sparking a debacle that put the world's financial system in peril.
The euro fell below the $1.28 mark for the first time since September 2010, data compiled by FOX Business show. The common currency recently dropped 1.3% to $1.278, while European blue chips fell 1.5%.
Wall Street got a fresh read on the labor market on Thursday ahead of the closely-watched monthly employment report from the Labor Department on Friday. The reports showed continuing expansion in the jobs market as the U.S. economy recovers.
The private sector tacked on 325,000 jobs in December, according to payroll-processing company ADP, the most since the survey began in 2001. Economists expected a much smaller increase of 178,000 jobs.
Planned layoffs at U.S. companies fell 1.6% to 41,785 in December from November, the lowest monthly total since June, according to outplacement firm Challenger, Gray & Christmas. The report also noted that 41% of all announced job cuts last year were in the financial and government sectors.
Meanwhile, new claims for unemployment benefits fell last week to 372,000 from an upwardly revised 387,000 the week prior. Economists were expecting a drop to 375,000 from an initial reading of 381,000.
Energy markets were to the downside. The benchmark crude oil contract traded in New York fell $1.41, or 1.4%, to $101.81 a barrel. Wholesale RBOB gasoline prices fell 1.8% to $2.766 a gallon.
Gold prices gained $7.40, or 0.46%, to $1,620 a troy ounce.
Barnes & Noble (NYSE:BKS) said it is considering spinning off its Nook e-reader business and pared back its full-year profit forecast. Shares were down 17.1% on the news.
Macy's (NYSE:M) boosted its 2011 earnings forecast by 3 cents per share and unveiled plans to double its dividend to 20 cents per share.
European blue chips fell 1.5%, the English FTSE 100 dipped 0.15% to 5624 and the German DAX rose 0.15% to 6096.
In Asia, the Japanese Nikkei 225 slid 0.83% to 8489 and the Chinese Hang Seng rose 0.46% to 18813.