Stocks, oil off lows; US data drives worries

Stocks rebounded and the euro rallied on Thursday on news of a financial lifeline for Greece, while bonds added to losses after worry over the US credit rating was raised.

Long-dated US bonds extended their losses after Moody's Investors Service said the United States risked a credit ratings downgrade if its legal borrowing limit is not raised.

The euro hit a one-month above USD 1.45 to the dollar on news that senior euro-zone officials had agreed in principle to a new three-year adjustment plan for Greece to pay off its mountain of debt.

On Wall Street, the benchmark S&P 500 hovered in just-positive territory after recording its worst day in 10 months on Wednesday and touching a six-week bottom in Thursday's early trading.

Oil rose about a quarter percent in New York trading, above the USD 100 a barrel support, as it tracked the euro's gains. The market had fallen more than 1% earlier, reaching USD 98.46, after a surprise jump in US crude stockpiles and talk that OPEC production might rise to cool high prices, which has hurt demand and global growth.

Despite the rebound, the latest batch of weak US economic data kept investors on guard. Many were holding their bets ahead of Friday's release of the US government's jobs report for May, expected to show job growth has slowed again after picking up in April.

"If you think the risks are rising, then you have got to take some money off the table just from a risk-reward perspective, and that's what we've done," said Bruce Bittles, chief investment strategist at Robert W Baird & Co in Nashville.

At 3 pm EDT (1900 GMT), the Dow Jones industrial average was down 2.04 points, or 0.02%, at 12,288.10. The Standard & Poor's 500 Index was up 2.38 points, or 0.18%, at 1,316.93. The Nasdaq Composite Index was up 10.18 points, or 0.37%, at 2,779.37.

Copper, a key industrial metal, closed down half a percent in New York after hitting a one-week low during the session as weak US labour data heightened concerns about the world's biggest economy.

The government is expected to report on Friday that employers hired 150,000 workers in May, according to a Reuters survey, after increasing payrolls by 244,000 in April.

The Labor Department said on Thursday that first-time claims for jobless benefits in the latest week fell by 6,000 to 422,000. The figure was below expectations for a decline to 415,000.

"Every indication we have had so far points to a slightly softer labor market in the US," said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto.

Weakness in the economy was further underscored by a report from the Commerce Department showing new orders received by US factories fell 1.2% in April after rising 3.8% in March.

Appetite for risk-taking has been on the decline since late May due to lackluster data from Europe and China.

"We've been through a couple-week period here where basically every piece of economic data has just been awful," said John Canally, investment strategist and economist for LP Financial in Boston.

With the US Federal Reserve set to wrap up its USD 600 billion bond buying program later this month, signals of more economic weakness ahead are especially worrying to investors involved in riskier assets such as equities, high-yield bonds and emerging markets.

The MSCI index of global equities fell 1.01%. European shares fell to a one-week closing low as the US data raised concerns about the pace of recovery.

The euro was last up 1.2% at USD 1.44971, having risen as high as USD 1.4515 on trading platform EBS.

The US 10-year Treasury note was last down 23/32 in price and yielding 3.03%, up from 2.95% at Wednesday's close. The 30-year bond lost 1-23/32 in price to yield 4.25%, up from 4.15%.