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NEW YORK (Reuters) - Stocks edged higher on Wall Street in another volatile session on Thursday while the euro fell 1 percent on a darkening euro zone outlook as investors grew cautious ahead of the closely watched U.S. monthly jobs report.
Global stock markets rallied earlier following a pledge from European Central Bank President Mario Draghi to beef up or prolong the bank's economic stimulus if necessary.
The comments came as the bank cut its inflation and growth forecasts for the euro zone and weighed on the euro.
Nervousness ahead of the U.S. Labor Department's monthly jobs report on Friday and what it may mean for the Federal Reserve's interest rate outlook caused stock investors to trim gains in late trade.
The U.S. central bank, which meets on Sept. 16-17, has said it will raise rates when it sees a sustained economic recovery. While the U.S. labor market has strengthened, inflation remains below the Fed's 2 percent target.
Investors also remain on edge after recent market turmoil sparked by concerns over slowing growth in China and its potential impact on the global economy.
"After a waterfall decline like we had over a week ago, you can have violent moves both up and down. That's a little of what we're seeing now as well as positioning in advance of not just the jobs number tomorrow, but a long weekend where we will be digesting the jobs number and whatever else we get over the weekend," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
The Dow Jones industrial average .DJI rose 23.38 points, or 0.14 percent, to 16,374.76, while the benchmark S&P 500 .SPX gained 2.27 points, or 0.12 percent, to 1,951.13. The Nasdaq Composite .IXIC dropped 16.48 points, or 0.35 percent, to 4,733.50.
U.S. markets will be closed on Monday for the Labor Day holiday. MSCI's all-country stock index .MIWD00000PUS rose 0.5 percent, while the FTSEuroFirst .FTEU3 leading index of 300 shares closed up 2.4 percent. Germany's DAX shot up 2.7 percent .GDAXI.
Economic data showing the U.S. trade deficit narrowed in July to its lowest level in five months as exports rose broadly also helped U.S. stocks in early trading.
Other reports showed activity in the global manufacturing and service sectors expanded in August at the same pace as in July, with both the United States and euro zone doing better than Asia.
China's stock markets, the root of much of the global volatility in recent weeks, were closed on Thursday for the start of a two-day holiday.
The euro fell, surrendering most of the solid gains it notched against the dollar since China devalued its yuan currency last month.
During Draghi's news conference, the euro EUR= dropped 1.4 percent against the dollar to touch a two-week low of $1.1108. It was last off 0.90 percent at $1.1122
The euro zone currency had earlier this week touched a high of $1.1332 as investors spooked by China's market turmoil moved heavily into the euro and yen.
Oil prices inched higher in seesaw trade, following the gains in equities for a second straight day despite a weekly build in U.S. crude inventories.
Brent's front-month contract LCOc1, settled up 18 cents at $50.68 a barrel. U.S. crude's front-month contract CLc1 gained 50 cents, settling at $46.75.
Treasury debt prices rose after the dovish outlook from the ECB made safe-haven U.S. government debt more attractive, but caution ahead of Friday's U.S. employment report limited gains.
U.S. benchmark 10-year Treasury notes US10YT=RR were last up 6/32 in price to yield 2.17 percent.
Gold fell as the dollar jumped against the euro. Spot gold XAU= slid as much as 1.1 percent to a session low of $1,121.35 an ounce.
Additional reporting by Michael Connor in New York; Editing by Dan Grebler and Chizu Nomiyama