Europe weighs on Wall St but banks rise

Traders work on the floor of the New York Stock Exchange January 4, 2012.

NEW YORK (Reuters) - U.S. stocks fell slightly on European debt worries on Thursday, but technology and financial shares rose on data pointing to a strengthening U.S. economy.

Financial shares were the day's top gainers in volatile trading on Wall Street. At the same time, Europe's bank stocks fell on worries over their ability to raise capital amid a sovereign debt crisis.

Data signaled improvement in the U.S. labor market. More than twice the expected number of private sector jobs were added in December while initial jobless claims dropped 15,000 in the latest week. In addition, the pace of U.S. services growth quickened more than expected in December.

"The idea from the data is that our economy is picking up, so for banks, they'll start to see some loan growth, which will feed into their profits," said James Dunigan, chief investment officer at PNC Wealth Management in Philadelphia.

"That's different than concerns about capital and stability in Europe, which the region is still dealing with," added Dunigan, who helps oversee $105 billion.

European banks fell 3.2 pct while the KBW Banks index rose 1.2 percent. Bank of America Corp advanced 5.3 percent to $6.12.

Despite solid demand for a French government debt sale, investors fretted about more fragile economies, such as Italy and Spain. The euro, which has been closely correlated to global equities, fell to a 15-month low against the dollar on Thursday.

The Dow Jones industrial average was down 42.23 points, or 0.34 percent, at 12,376.19. The Standard & Poor's 500 Index was down 1.48 points, or 0.12 percent, at 1,275.82. The Nasdaq Composite Index was up 7.20 points, or 0.27 percent, at 2,655.56.

The Nasdaq was boosted by strength in tech shares. Marvell Technology Group (MRVL.O) gained 5.4 percent to $14.95 while Seagate Technology was up 5.4 percent to $17.72.

The S&P retail index fell 0.6 percent as December sales rose, though discounts cut into profits over the holiday shopping season. Target Corp fell 3.5 percent to $48.26 while Macy's Inc (M.N) added 1.9 percent to $33.27.

Dendreon Corp (DNDN.O) shares jumped 41.5 percent to $10.76 after the biotechnology company reported a more than three-fold jump in revenue of its prostate cancer vaccine.

But bookstore owner Barnes & Noble Inc (BKS.N) shares fell 24.4 percent to $10.21 after the company said it is considering splitting off its Nook electronic reader business and also cut its full-year earnings forecast.

(Reporting By Ryan Vlastelica; Editing by Kenneth Barry)