* S&P 500 ends up slightly after paring sharp early gains
* Euro falls on euro zone outlook
* U.S. jobs data due on Friday
(Updates with U.S. market closing)
By Caroline Valetkevitch
NEW YORK, Sept 3 (Reuters) - The euro fell 1 percent on
Thursday on a darkening euro zone outlook, while U.S. stocks
pared sharp early gains to end barely higher as investors grew
cautious ahead of Friday's August jobs report.
Global stock markets rallied earlier in the session
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 U.S. interest
rate outlook took out most of the early gains in stocks late in
the session.
The Federal Reserve, which meets on September 16-17, has
said it will raise rates when it sees sustained economic
recovery. While the labor market has strengthened, inflation
remains below the Fed's 2 percent target.
"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 shrank 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
U.S. and euro zone doing better than Asia. ID:nL1N1191KE
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. ID:nL4N1171LM
The euro fell, surrendering most of the solid gains it put
up against the dollar since China devalued the yuan 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 after earlier this week
reaching a high of $1.1332 as investors spooked by the Chinese
markets turmoil moved heavily into the euro and yen.
Oil prices inched higher in see-saw trade, following the
gains in U.S. equities for a second 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. At one point during the session it had risen
above $52.
U.S. crude's front-month contract CLc1 gained 50 cents,
settling at $46.75. It went above $48 earlier.
U.S. BONDS RISE
U.S. Treasuries prices rose after the dovish outlook from
the ECB made U.S. government debt more attractive than European
counterparts. But caution ahead of Friday's U.S. employment
report limited gains.
Benchmark 10-year Treasury notes US10YT=RR were last up
6/32 in price to yield 2.17 percent.