LONDON – Stocks spiked sharply higher on Friday after forecast-busting U.S. jobs figures reinforced hopes that the recovery in the world’s largest economy is gathering pace at a time when other regions, notably Europe, may be heading back into recession.

Figures from the Labor Department showed that employers in the U.S. added 243,000 jobs in January. As well as being the highest in nine months, the gain was around 100,000 more than anticipated.

The advance also contributed to a fifth straight fall in the U.S. unemployment rate. At 8.3 percent, it’s the lowest in three years.

The January jobs report was filled with other encouraging data and revisions. Hiring was widespread across many high-paying industries and pay increased, too.

“In terms of the broader outlook, one report does not a trend make but there is little doubt that U.S. economic data continues to surprise on the upside,” said Dan Greenhaus, chief global strategist at BTIG.

“We’ll have to wait until February’s report to see if this continues but for now, the risk rally is clearly on and from an economic perspective, it is most certainly warranted,” Greenhaus added.

In Europe, the FTSE 100 index of leading British shares was up 1.4 percent at 5,875 while Germany’s DAX rose 1.3 percent to 6,743. The CAC-40 in France was 0.8 percent higher at 3,405.

In the U.S., the Dow Jones industrial average was up 0.9 percent at 12,819 while the broader Standard & Poor’s 500 index rose 1 percent to 1,338.

The dollar also garnered some strength from the jobs figures as traders scaled back their expectations that the Federal Reserve would be pumping more money into the economy, evidenced also by a fall in Treasuries. The euro was trading 0.3 percent lower at $1.3097 while the dollar was 0.6 percent higher at 76.61 yen.

Andrew Wilkinson, chief economic strategist at Miller Tabak & Co., said the Fed would need more evidence before it is comfortable about the durability of the U.S. recovery, especially with the housing market still in a fragile state.

“It will take a series of repeat reports like today’s to deliver meaningful improvements to the unemployment rate before the Fed will feel confident that any improvement in employment prospects will replace the need for it to massage yields lower,” Wilkinson said.

Market sentiment has been fairly upbeat so far in 2012, partly on the back of a run of fairly strong U.S. economic data, which has convinced investors that the U.S. economy is over its soft patch from last summer.

The state of the U.S. economy contrasts with that of Europe, which appears headed for recession.

Official figures showed retail sales in the 17-nation eurozone dropped 0.4 percent during December, in contrast to expectations for an increase of the same amount.The data reinforced expectations that the eurozone contracted during the fourth quarter of the year. Eurostat is due to publish its first estimate for the quarter on Feb. 15.

The focus on the U.S. has proved a welcome diversion for some traders from monitoring the daily grind of Europe’s debt crisis, where much hinges on whether Greece can secure a deal with its private creditors, as is anticipated. A deal is expected soon, though that has been the official line for a few weeks.

Earlier in Asia, the picture was mixed.

Japan’s Nikkei 225 index fell 0.5 percent to close at 8,831.93 but Hong Kong’s Hang Seng ended marginally higher at 20,756.98.

Mainland Chinese shares extended gains fueled by news of fresh support for the farming and small-business sectors, with the benchmark Shanghai Composite Index rising 0.8 percent to 2,330.41 while the Shenzhen Composite Index added 1.5 percent to 878.29.

Oil markets were relatively subdued. Benchmark oil for March delivery was up 39 cents at $96.75 per barrel in electronic trading on the New York Mercantile Exchange.

____

Pamela Sampson in Bangkok contributed to this report.

SINGAPORE – Global stocks extended a rally Thursday amid investor optimism that the U.S. economy may grow more than previously expected this year.

Benchmark oil stayed below $98 per barrel while the dollar rose against the euro but fell against the yen.

In early trading in Europe, the FTSE 100 index of leading British shares was steady at 5,789.42 while Germany’s DAX was 0.2 percent higher at 6,628.94. The CAC-40 in Paris advanced 0.5 percent at 3,384.05. Wall Street also appeared headed for a higher opening, with Dow Jones industrial futures rising 0.1 percent to 12,671 while S&P 500 futures gained 0.1 percent to 1,321.30.

The gains followed a rally in Asia earlier in the day. Tokyo’s Nikkei 225 rose 0.8 percent to 8,876.82 while Hong Kong’s Hang Seng shot up 2 percent to 20,739.45 and Seoul’s Kospi added 1.3 percent to 1,984.30.

Signs of an improving U.S. economy have helped bolster trader sentiment. Factories raised output in January by the most in seven months, according to the Institute for Supply Management’s manufacturing index on Wednesday. And the Commerce Department said construction spending rose 1.5 percent in December, the fifth straight monthly gain.

Investors have also been cheered by growing optimism that contagion from a likely Greek debt default can be contained.

Global equities are advancing “on hopes of the global economy gaining a solid footing and the banking sector continued to rally on the belief that Europe will avoid a catastrophe,” IG Markets in Melbourne said in a report.

China’s benchmark Shanghai Composite Index climbed 2 percent to 2,312.56 on Thursday amid signs manufacturing improved in January for a second straight month. Australia’s S&P/ASX 200 jumped 1 percent to 4,267.80. Benchmarks in Singapore, Taiwan, New Zealand, Thailand and India all gained ground.

“After stepping into a soft patch in the fourth quarter, Asian economic growth is gradually picking up,” said Frederic Neumann, co-head of Asian economics at HSBC in Hong Kong. “This rebound is led by the region’s giants: China, India, and Japan.”

Early Thursday, the Tokyo Stock Exchange suspended trading in 241 securities, including Sony Corp. and Hitachi Ltd., due to a glitch in its electronic trading system. Trading in the suspended securities resumed near midday.

Benchmark oil for March delivery rose 30 cents to $97.91 per barrel Thursday in electronic trading on the New York Mercantile Exchange. The contract fell 87 cents to settle at $97.61 on Wednesday.

In currencies, the euro fell to $1.3145 from $1.3158 late Wednesday in New York. The dollar fell to 76.09 yen from 76.20 yen.

SINGAPORE – Asian stocks extended a global rally Thursday amid investor optimism that the U.S. economy may grow more than previously expected this year.

Tokyo’s Nikkei 225 rose 0.8 percent to 8,881.27 while Hong Kong’s Hang Seng gained 1.2 percent to 20,585.44 and Seoul’s Kospi added 1.4 percent to 1,985.82.

Signs of an improving U.S. economy have helped bolster trader sentiment. Factories raised output in January by the most in seven months, according to the Institute for Supply Management’s manufacturing index on Wednesday. And the Commerce Department said construction spending rose 1.5 percent in December, the fifth straight monthly gain.

Investors have also been cheered by growing optimism that contagion from a likely Greek debt default can be contained.

Global equities are advancing “on hopes of the global economy gaining a solid footing and the banking sector continued to rally on the belief that Europe will avoid a catastrophe,” IG Capital in Melbourne said in a report.

On Wednesday, the Dow Jones industrial average closed up 0.7 percent at 12,716.46. The S&P added 0.9 percent to 1,324.09 while the Nasdaq composite index rose 1.2 percent to close at 2,848.27.

European stock indexes also rose Wednesday. France’s CAC-40 gained 2.1 percent while Britain’s FTSE 100 rose 1.9 percent and Germany’s DAX jumped 2.4 percent.

China’s benchmark Shanghai Composite Index climbed 0.2 percent to 2,272.99 on Thursday amid signs manufacturing improved in January for a second straight month.

Shares in Singapore, Australia, Taiwan and New Zealand all gained ground.

“After stepping into a soft patch in the fourth quarter, Asian economic growth is gradually picking up,” said Frederic Neumann, co-head of Asian economics at HSBC in Hong Kong. “This rebound is led by the region’s giants: China, India, and Japan.”

Early Thursday, the Tokyo Stock Exchange suspended trading in 241 securities, including Sony Corp. and Hitachi Ltd., due to a glitch in its electronic trading system. Trading in the suspended securities was to resume midday.

Benchmark oil for March delivery rose 6 cents to $97.67 per barrel Thursday in electronic trading on the New York Mercantile Exchange. The contract fell 87 cents to settle at $97.61 on Wednesday.

In currencies, the euro rose to $1.3193 from $1.3158 late Wednesday in New York. The dollar slipped to 76.12 yen from 76.15 yen.

NEW YORK (Reuters) – A month-long rally on Wall Street appears to be sputtering as stocks slipped on Thursday in what investors called a possible warning of weakness ahead.

Weaker-than-expected home sales figures and a group of mixed earnings reports tempered the market's recent buying interest.

With the S&P 500 up nearly 5 percent for the year, analysts said the market was due for a pullback. Wall Street has advanced in recent weeks as U.S. data raised expectations the economic recovery was picking up steam.

"This market is tired and overbought, and we're seeing the results of that today," said Larry McMillan, president of McMillan Analysis Corp.

"After yet another knee-jerk rally on moderately positive economic news, the buyers are out of gas," McMillan said.

Stocks began higher, helped by the Federal Reserve's vow on Wednesday to keep interest rates near zero at least until the end of 2014, a support for buying of risky assets.

But gains were short-lived and the market turned lower in the morning. The Dow's losses were limited by Caterpillar Inc (CAT.N), which rose 2.1 percent to $111.31. The heavy equipment maker posted a jump in quarterly earnings that far exceeded Wall Street expectations.

Housing-related stocks led the reversal after sales of new single-family homes fell for the first time in four months in December. It followed Wednesday's soft pending home sales report and dented optimism that housing may have reached a bottom.

Toll Brothers Inc (TOL.N) lost 5 percent to $22.07. The PHLX housing sector index (.HGX) declined 1.3 percent.

Banks, which stand to benefit from a recovery in housing, also fell. The KBW Bank index (.BKX) dropped 2.2 percent. SunTrust Banks Inc (STI.N) shed 5.2 percent to $20.50 after Deutsche Bank lowered its rating on the stock.

AT&T Inc (T.N) posted a $6.7 billion quarterly loss, in part on a break-up fee for its failed T-Mobile USA merger. The shares fell 2.5 percent to $29.45 and were the primary reason the telecom sector was the worst of the S&P's 10 sectors.

The Dow Jones industrial average (.DJI) was down 22.33 points, or 0.18 percent, at 12,734.63. The Standard & Poor's 500 Index (.SPX) was down 7.60 points, or 0.57 percent, at 1,318.45. The Nasdaq Composite Index (.IXIC) was down 13.03 points, or 0.46 percent, at 2,805.28.

Stocks also rose early after data showed orders for durable manufactured goods rose more than expected in December, while unemployment benefit claims last week rose only moderately.

3M Co (MMM.N), a conglomerate with operations throughout the economy, also supported the Dow after it reported higher-than-expected quarterly earnings as demand from industrial and transport markets offset weak sales to makers of consumer electronics. The shares rose 1.2 percent to $87.58.

This is one of the busiest weeks of earnings season, with 117 S&P companies expected to report. According to Thomson Reuters data, 59 percent of the 152 companies in the S&P 500 that have reported earnings beat analysts' forecasts, down from the 70 percent beat rate in recent quarters at this stage.

Amgen Inc's (AMGN.O) shares fell 1.6 percent to $68.08 and weighed on the Nasdaq after the world's largest biotechnology company said it would pay more than $1 billion to buy Micromet Inc (MITI.O), a deal that would give it access to the company's novel cancer treatment technology.

Micromet's shares jumped 32.1 percent to $10.94 and were the most heavily traded on Nasdaq.

About 7.9 billion shares exchanged hands on the New York Stock Exchange, NYSE Amex and Nasdaq on Thursday.

(Reporting By Angela Moon; additional reporting by Doris Frankel; Editing by Kenneth Barry)

NEW YORK (Reuters) – Wall Street edged lower

on Thursday as housing and financial stocks lost ground after weaker-than-expected housing data gave investors reason to pause after a recent rally.

Housing-related stocks declined after data showed sales of new single-family homes fell for the first time in four months in December and were below Wall Street expectations. The data followed Wednesday's soft pending home sales report and dented optimism that the housing market may have reached a bottom.

"Clearly we have had some decent housing data. (But) now we've had, a little bit today and yesterday, a potential slowdown," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati.

"It does seem like a little bit of profit-taking on the weak housing data."

Toll Brothers Inc (TOL.N) lost 2.7 percent to $22.61. The PHLX housing sector index (.HGX) dipped 0.8 percent. Banks, which stand to benefit from a recovery in housing, also fell. The KBW Bank index (.BKX) dropped 1.5 percent. SunTrust Banks Inc (STI.N) shed 4.5 percent to $20.65 after Deutsche Bank lowered its rating on the stock.

Stocks rose at the start of the session after data showed orders for durable manufactured goods rose more than expected in December, while unemployment benefit claims last week rose only moderately.

The Federal Reserve's vow on Wednesday to keep interest rates near zero at least until the end of 2014 also underpinned stocks, leading investors to bet more money would be driven into risky assets. The benchmark S&P index was up more than 5 percent for the year.

Caterpillar Inc (CAT.N) kept the Dow in positive territory as its shares gained 3.5 percent to $112.89. The manufacturer posted a jump in quarterly earnings that far exceeded Wall Street expectations on increased global demand for construction machinery and mining equipment.

The Dow Jones industrial average (.DJI) gained 40.11 points, or 0.31 percent, to 12,797.07. The Standard & Poor's 500 Index (.SPX) slipped 0.93 point, or 0.07 percent, to 1,325.12. The Nasdaq Composite Index (.IXIC) shed 1.50 points, or 0.05 percent, to 2,816.81.

3M Co (MMM.N), a conglomerate with operations throughout the economy, reported higher-than-expected quarterly earnings as demand from industrial and transport markets offset weak sales to makers of consumer electronics. The shares rose 1.6 percent to $87.90.

This is one of the busiest weeks of earnings season, with 117 S&P companies expected to report. According to Thomson Reuters data, 59 percent of the 152 companies in the S&P 500 that have reported earnings beat analysts' forecasts, down from the 70 percent beat rate in recent quarters at this stage.

AT&T Inc (T.N) posted a $6.7 billion quarterly loss on a break-up fee for its failed T-Mobile USA merger and a pension-related charge on top of costly subsidies for smartphones. The shares fell 2 percent to $29.61.

Amgen Inc's (AMGN.O) shares fell 1.3 percent to $68.32 and weighed on the Nasdaq after the world's largest biotechnology company said it would pay more than $1 billion to buy Micromet Inc (MITI.O), a deal that would give it access to the company's novel cancer treatment technology.

Micromet's shares jumped 31.9 percent to $10.92 and were the most heavily traded on Nasdaq.

(Reporting By Chuck Mikolajczak; Editing by Kenneth Barry)

NEW YORK (Reuters) – Stocks finished almost flat on Monday as investors took a break from a recent rally, awaiting earnings from bellwethers such as Apple later in the week.

The S&P 500 is up nearly 5 percent so far this year as an improving U.S. economy has bolstered investor optimism. The Dow and the S&P 500 both had their best weekly performances in a month last week.

"Investors are reserved after a mixed bag of results. Many companies have announced sluggish results, portraying a cautious environment going forward," said Robert Lutts, chief investment officer at Cabot Money Management in Salem, Massachusetts.

"The expectations are very moderate in the market, so a little bit of good news could lead to a significant pop in a stock."

According to Thomson Reuters data, 15 percent of S&P 500 companies have reported earnings, and just 59 percent posted results above Wall Street's expectations. That percentage trails the average of about 70 percent, though the rate is expected to improve as the earnings season gathers steam.

Among the 117 S&P 500 companies expected to report earnings this week is tech company Apple Inc (AAPL.O), due after the closing bell on Tuesday.

The euro-zone crisis remained in the background for the market but has had less of an effect on stocks lately. Germany and France pushed for a deal between Greece and its private creditors, and the two said they still were dedicated to a new bailout that Athens needs by March to stave off default.

The Dow Jones industrial average (.DJI) slipped 11.66 points, or 0.09 percent, to end at 12,708.82. But the Standard & Poor's 500 Index (.SPX) inched up 0.62 point, or 0.05 percent, to close at 1,316.00. And the Nasdaq Composite Index (.IXIC) dipped 2.53 points, or 0.09 percent, to end at 2,784.17.

TEXAS INSTRUMENTS UP LATE

After the bell, Texas Instruments Inc (TXN.O) shares rose 2.5 percent to $34.00 after reporting higher-than-expected fourth-quarter revenue.

In addition to Apple, a number of Dow components are due to report earnings on Tuesday, notably Verizon Communications Inc (VZ.N), Travelers Companies Inc (TRV.N), McDonald's Corp (MCD.N), DuPont (DD.N) and Johnson & Johnson (JNJ.N).

Wall Street's agenda includes the Federal Reserve's first policymaking meeting of the year, which will begin on Tuesday and conclude on Wednesday with a statement. The Fed is likely to say that it will not start raising interest rates again until the first half of 2014, more than five years after cutting them to near zero, a Reuters poll of leading Wall Street economists showed.

The U.S. central bank will begin a new practice of announcing policymakers' interest-rate projections when this week's meeting ends on Wednesday.

During Monday's regular session, Halliburton Co (HAL.N) shares fell 2.1 percent to $35.44 after the world's second-largest oilfield services group warned that the deep slump in U.S. natural gas prices could cause near-term disruptions that pinch first-quarter earnings.

On a positive note, Chesapeake Energy Corp (CHK.N) gained 6.3 percent to $22.28 after it said it will reduce dry gas drilling and cut production in response to natural gas prices falling below "economically attractive" levels. Natural gas companies' shares were among the day's best performers, with an index of those stocks (.XNG) rising 3.6 percent.

Research In Motion Ltd (RIM.TO)(RIMM.O) fell 8.5 percent to $15.56 as analysts were skeptical about the resignation of the BlackBerry maker's co-chief executives.

Sears Holding Corp (SHLD.O) fell 3.3 percent to $47.39 after rising as high as $54.76 in what analysts said could be a short squeeze.

The stock is the most shorted stock in the S&P 500, according to Data Explorers, with 94 percent of shares available used to sell short. The retailer has been the best-performing stock in the index for the year, up more than 50 percent.

"That is a classic short squeeze. There have been headlines all over the name now for the better part of a month or so, and it's largely been quite negative," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.

Trading volume was at about 6.6 billion shares on the New York Stock Exchange, NYSE Amex and Nasdaq, in line with the daily average of 6.68 billion.

Advancers outnumbered decliners on the NYSE by a ratio of about 3 to 2. In contrast, on the Nasdaq, about six stocks fell for every five that rose.

(Reporting By Angela Moon; Editing by Kenneth Barry and; Jan Paschal)

NEW YORK (Reuters) – Stocks were little changed on Monday as recent earnings reports and development in the euro zone provided little incentive to disrupt the recent tone for equities on the heels of the best weekly performance by the S&P 500 in a month.

U.S. stocks are up nearly 5 percent for the year as an improving U.S. economy and earnings that have largely met expectations have boosted investor optimism. The Dow and S&P 500 both had their best weekly performances in a month last week.

According to Thomson Reuters data, 15 percent of S&P 500 companies have reported earnings, with 59 percent posting results above Wall Street expectations.

While the percentage of fourth-quarter earnings reports that beat estimates has trailed recent quarters, the rate is expected to improve as earnings season picks up steam. For the week of January 23, 117 S&P 500 companies are expected to report earnings.

"This is the momentum trade. The market got out of gates very strong this year," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.

"Earnings have been very cooperative in terms of keeping the tone positive. Macroeconomic data out of Washington has remained slightly better than expected, the employment numbers have helped. There are a lot of parts to this puzzle that are supporting a positive tone and a constructive internal character to the market."

The euro zone crisis was still lurking in the background. Germany and France pushed for a deal between Greece and its private creditors and said they remained dedicated to a new bailout that is needed by March to stave off a default. Euro zone finance ministers could decide later Monday what debt restructuring terms they would accept.

The Dow Jones industrial average (.DJI) was down 35.20 points, or 0.28 percent, at 12,685.28. The Standard & Poor's 500 Index (.SPX) dipped 2.61 points, or 0.20 percent, at 1,312.77. The Nasdaq Composite Index (.IXIC) was off 8.48 points, or 0.30 percent, at 2,778.22.

Halliburton Co (HAL.N) shares fell 3.2 percent to $35.03 after the world's second largest oilfield services group warned the deep slump in U.S. natural gas prices could cause near-term disruptions that pinch first-quarter earnings.

Research In Motion Ltd's (RIM.TO)(RIMM.O) fell 6.6 percent to $15.87 as analysts were skeptical about the resignation of the BlackBerry maker's co-chief executives.

Sears Holding Corp (SHLD.O) advanced 3 percent to $50.47, easing from a session high of $54.76 in what analysts said could be a short squeeze.

The stock is the most shorted stock in the S&P 500, according to Data Explorers, with 94 percent of shares available used to sell short. The retailer has been the best performing stock in the index for the year, up more than 50 percent.

"That is a classic short squeeze. There have been headlines all over the name now for the better part of a month or so and it's largely been quite negative," said Knight Capital's Kenny.

Chesapeake Energy Corp (CHK.N) gained 4 percent to $21.80 after it said it will reduce dry gas drilling and cut production in response to natural gas prices falling below "economically unattractive levels".

(Reporting By Chuck Mikolajczak; editing by Jeffrey Benkoe)

LONDON – Another set of successful bond auctions in Europe and renewed confidence in the continent’s banks helped markets rally Thursday as investors awaited developments in Greece’s debt-reduction talks with private creditors.

Strong bank earnings out of the U.S. from Bank of America and Morgan Stanley, as well as a bigger reduction in weekly U.S. jobless claims, helped to shore up sentiment even further as Wall Street trading began.

European banks, including those considered particularly susceptible to a further outbreak of unease in Europe, such as France’s Societe Generale and Italy’s UniCredit, were further buoyed by the news that Germany’s second-largest bank, Commerzbank AG, won’t need help from shareholders or the government to boost its capital base.

The mood in financial markets has been fairly upbeat over the past couple of weeks and much of the optimism stems from a growing sense that Europe’s debt crisis, though not solved by any means, has stabilized to an extent.

The ability of France and Spain to tap investors for money at what were largely affordable rates, in spite of last week’s downgrade of their credit ratings by Standard & Poor’s, reinforced that view.

“European developments are once again at the forefront, with today’s European debt auctions proceeding smoothly,” said Nick Bennenbroek, an analyst at Wells Fargo Bank.

By early afternoon in Europe, France’s CAC-40 was up 1.5 percent at 3,313 while Germany’s DAX rose 0.6 percent to 6,393. The FTSE 100 index of leading British shares was 0.4 percent higher at 5,725.

The recent easing in concerns over Europe’s debt crisis has helped the euro clamber off Monday’s 17-month low against the dollar below $1.27. It’s now trading at $1.2890, up 0.2 percent on the day.

In the U.S., the Dow Jones industrial average was up 0.1 percent at 12,591 while the broader Standard & Poor’s 500 index rose 0.2 percent to 1,311.

The recent optimism could all disappear though if Greece fails to successfully conclude its debt-reduction negotiations with the Institute of International Finance, which represents private sector bondholders. Talks are set to continue later, having restarted Wednesday.

Greece needs to clinch the agreement quickly to qualify for more bailout loans before it faces a major bond repayment on March 20. Without the money, the country would find it difficult to service its debts and be forced to default, potentially triggering more turmoil in global markets.

Last October, Greece’s partners in the eurozone sanctioned a deal whereby Greece’s creditors agree to take a cut in the value of their Greek bond holdings to help lighten the country’s debt burden. The deal with private investors aims to reduce Greece’s debt by euro100 billion ($127.9 billion) by swapping private creditors’ bonds for new ones with a lower value. It is a key part of a euro130 billion international bailout, the second one for Greece.

Hopes that a deal is being thrashed out has helped shore up sentiment in markets in recent days as has the IMF’s revelation that it aims to raise up to $500 billion to meet its $1 trillion financing needs in coming years. The new money to be raised includes $200 billion that European countries recently agreed to hand the IMF.

Earlier in Asia, Japan’s Nikkei 225 index rose 1 percent to close at 8,639.68. South Korea’s Kospi rebounded 1.2 percent to 1,914.97 after a losing session Wednesday. Hong Kong’s Hang Seng rose 1.3 percent at 19,942.95.

Oil prices tracked equities higher — benchmark oil for February delivery was up 93 cents to $101.52 per barrel in electronic trading on the New York Mercantile Exchange.

___

Pamela Sampson in Bangkok contributed to this report.

NEW YORK (Reuters) – U.S. stocks paused on Thursday after a three-day rally, with investors concerned about weaker U.S. economic data and comments from the European Central Bank chief that painted a mixed picture of the region's debt crisis.

Energy stocks pressured the market after Chevron Corp (CVX.N), the second largest U.S. oil company, said fourth-quarter profit would be far below the previous quarter. Chevron was off 2.2 percent to $105.40, while the S&P energy sector (.GSPE) fell 0.5 percent, the biggest decliner among S&P groups.

ECB President Mario Draghi said the euro zone economy continued to face great uncertainty but saw some signs of stabilization. He said the ECB's flood of cheap loans was helping the banking system substantially.

U.S. retail sales rose at the weakest pace in seven months in December and first-time claims for jobless benefits increased, signs an economic recovery remained shaky.

The data disappointed investors, who had become optimistic about a recovery. After a recent batch of strong reports, some traders anticipated that equities would decouple from Europe's financial woes.

"It confirms the trend of positive data in the context of an overall weak economic landscape," said Quincy Krosby, market strategist for Prudential Securities.

"The question that has been haunting the market for some time is the underlying strength of the U.S. economy. Although we have had some strong numbers recently, today's numbers were less than expected, disappointing the market."

The Dow Jones industrial average (.DJI) was down 17.03 points, or 0.14 percent, at 12,432.42. The Standard & Poor's 500 Index (.SPX) was down 0.54 points, or 0.04 percent, at 1,291.94. The Nasdaq Composite Index (.IXIC) was up 5.56 points, or 0.21 percent, at 2,716.32.

The S&P 500 fell below a five-month high after rising in six of the year's first seven sessions. It closed at 1,292.48 on Wednesday and faced technical resistance near the 1,300 level.

But helping the market's mood, Italian and Spanish government yields fell sharply in debt auctions in countries on the front line of the debt crisis.

Among individual stocks, shares of Multi-Fineline Electronix Inc (MFLX.O) jumped 18.6 percent to $25.53 after preliminary quarterly net sales for the maker of circuit boards for electronics came in better than expected.

Sears Holdings Corp (SHLD.O) dropped 3.4 percent to $31.78 on news CIT Group Inc (CIT.N) would no longer finance supplier shipments to the retailer.

Wynn Resorts Ltd (WYNN.O) slid 4.3 percent to $107.03 after Vice Chairman and major shareholder Kazuo Okada sued the casino operator, claiming it was blocking his attempts to review business accounts despite repeated requests.

(Reporting By Angela Moon; editing by Jeffrey Benkoe)

(This version corrects the analyst title to market strategist from chief market strategist)

WASHINGTON – They were let back into Zuccotti Park, but kicked them out of a vacant house in Seattle. In other places, Occupy protesters are in courtrooms fighting evictions.

While the movement flickers, the protest in the nation’s capital is persisting into the winter, buoyed by demonstrators who camp out on federal land in a city with a tolerant, even celebrated, history of civil disobedience. Washington even has two Occupy sites within blocks of each other.

“We didn’t initiate it — that was with Occupy Wall Street — but we’re carrying it on. And you know what? So are they,” said Joseph Bieber, who came to Washington after the Occupy site in Philadelphia was shut down.

Demonstrators like Bieber have found a new home in D.C., where organizers expect a protest Tuesday on Capitol Hill — dubbed Occupy Congress — to draw thousands of people and bring renewed attention to the movement in Washington and to their overall opposition to corporate greed and income inequality.

“We can’t just protest on Wall Street We must also protest Congress directly if we want to have real change,” said Mario Lozada, a protester from Philadelphia who plans to be in Washington next week for the protest.

Though the D.C. protesters have provoked the ire of a Republican congressman, they have been tolerated — with some growing signs of exasperation — by a mayor who forged his political identity as an activist and by a National Park Service that says it’s determined to protect First Amendment rights. Though they’ve dwindled considerably in numbers, the demonstrators, and a few homeless people, have remained despite occasionally freezing temperatures, the holidays and, more recently, rat infestations and health department inspections.

It’s unclear how long they’ll remain or how the situation will end.

Several dozen tents occupy Freedom Plaza and McPherson Square, both just blocks from the White House, though it’s hard to tell how many people are there on any given night. The group at McPherson Square was inspired by the protesters in New York, while the Freedom Plaza site — a generally older crowd — had a war protest that morphed into an Occupy encampment.

In New York, protesters have been holding meetings at various indoor spaces after tents and sleeping bags were banned from Zuccotti Park in mid-November. A police raid evicted protesters who had been sleeping there since Sept. 17.

On Tuesday, metal barricades that had surrounded Zuccotti Park were removed, and about 300 demonstrators “re-Occupied” the park. Most left, though, as the night wore on.

Ned Merrill was one of a handful of protesters around a day later.

“We need to have a symbolic presence,” said Merrill, 52, a blanket draped over his shoulder.

In Seattle, sheriff’s deputies evicted seven people early Wednesday from a vacant house that had been taken over as part of the movement. Deputies said they appeared to be squatters who did not have a political motive. However, the house is covered in graffiti, including “no banks, no landlords” and “capitalism is exploitation.”

Other encampments remain, including in Portland, Me., and in Pittsburgh, where attorneys for the protesters argued in court Tuesday against eviction.

The D.C. demonstrators have been permitted to stay despite a string of recent clashes that might have triggered eviction in cities less accustomed to large-scale protests.

More than 30 protesters were arrested last month in McPherson Square after refusing to disassemble a makeshift wooden building they had erected in the middle of the night as a shed for the approaching winter. The building was torn down and removed.

Days later, a demonstration shut down K Street — home to the nation’s largest lobbying firms — and ended with more than 60 arrests. A U.S. Park Police officer responding to a report of a fight inside a McPherson Square tent was kicked so hard in the crotch last month that he fell to the ground vomiting, court papers said. And on Wednesday, police found a 13-month-old baby alone in a McPherson Square tent and arrested a man who came forward later claiming to be the child’s father.

But unlike other encampments on city or private property, the protesters are in federal parks — and enjoying special First Amendment protections as a result.

The demonstrators at Freedom Plaza have received a permit to stay through the end of next month — some have already moved their demonstration indoors — and under National Park Service regulations, the McPherson Square protestors won’t need a permit if the crowd remains under 500 people.

“There’s a very strong presumption and deference given to First Amendment free speech and, more specifically, political free speech,” said National Park Service spokesman Bill Line.

There are signs of wariness.

District of Columbia Mayor Vincent Gray, who was arrested in April while demonstrating in support of D.C. autonomy, initially supported the protesters, but has asked for federal funds to reimburse the city for Occupy-related costs. He said law-breaking won’t be tolerated and that the protesters’ cause is appearing muddled.

“It certainly has the patience wearing thin of those in the city and, to the extent that they’ve been able to express what their cause is, I don’t think it helps their cause,” Gray said.

U.S. Rep. Darrell Issa, a California Republican and chairman of the Committee on Government Oversight and Reform, has demanded answers from the Interior Department about why the protesters have been permitted to stay so long. He says they have damaged or destroyed McPherson Square upgrades, including new grass and refurbishments, paid for with stimulus funds.

The National Park Service spokesman says Issa’s request is under review, but he followed up with a letter this week accusing the agency of being unresponsive.

There are health concerns too.

A growing rat concentration at the sites caused McPherson Square protesters to shut down their kitchen and alarmed health officials, who lack jurisdiction but are consulting with other agencies, said department spokesman Najma Roberts. She said the department had no immediate plans to recommend eviction unless there was an outbreak of an illness or an advancing snowstorm.

Organizers of Tuesday’s Occupy Congress event expect thousands of demonstrators.

“Any dwindling that happened over the holidays is reversing,” said Lozada, the Philadelphia-based protester. “If we can successfully pull off a massive protest in the middle of January, I just see nothing but further growth happening in the spring.”

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Associated Press writer Karen Matthews in New York contributed to this report.

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