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Stocks pull off lows but still close down

Stocks finished well off their earlier lows in volatile trading Thursday, as techs recovered, but brewing worries over Europe kept a damper on gains.

The Dow Jones Industrial Average cut its losses, but still finished in negative territory, dragged by Hewlett-Packard and Caterpillar. American Express led the blue-chip gainers.

The S&P 500 and the Nasdaqalso finished off their lows. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, jumped above 14.

Most key S&P sectors were lower, led by materialsand energy.

Apple released a statement saying they will "thoroughly evaluate" Greenlight Capital's proposal to issue some form of preferred stock. Apple added that its management team and board of directors have been in active discussions about returning additional cash to shareholders. Apple is currently sitting on more than $130 billion of cash, more than a third of its market cap. Shares jumped following the company's statement.

Earlier, widely followed hedge fund manager David Einhorn's Greenlight Capital defended his decision to file suit against Apple, saying the tech company needs to do more to unlock value for shareholders. In addition, Einhorn said he is long the tech giant's shares and added his hedge fund Greenlight Capital has owned it since 2010.

Read More:Why Apple's Holding Onto All That Cash

"We've had a great start to the year and everyone's looking for reasons for a pullback," said Art Hogan, managing director at Lazard Capital Markets. "We also went from a hyperactive news flow week to a news vacuum this week — so we're now turning out focus on things like ECB, G20 and Washington. And when we shift to thinking about things that may go wrong from what's been going right, the market gets nervous."

The euro tumbled against the U.S. greenback after European Central Bank President Mario Draghi said risks to the bank's outlook for the euro zone were to the downside and that the exchange rate is important for growth and price stability. The ECB earlier decided to maintain its main interest rate at 0.75 percent.

"The exchange rate is not a policy target, but it is important for growth and price stability, and we certainly want to see whether the appreciation is sustained," said Draghi at a press conference.

The Bank of England kept its interest rate at 0.5 percent, voting to reinvest 6.6 billion pounds of bond holdings that mature in March and saying it would provide more stimulus if needed.

In addition, a two-day European Union (EU) summit is scheduled to kick off in Brussels, the first since British Prime Minister David Cameron confirmed the country will hold a referendum on EU membership.

Chicago Fed President Charles Evans told CNBC that the central bank policy will remain accomodative until the economy improves. Evan also said while he's optimistic that the economy is improving, the unemployment rate probably won't hit 6.5 percent until mid-2015. January's unemployment rate reading was 7.9 percent. Evans is a voting member of the Federal Open Markets Committee.

Blackberry rallied after Wells Fargo upgraded the smartphone company to "outperform." In addition, the tech firm announced it added former executive vice president of Verizon Richard Lynch and former CEO of Sony Ericsson Mobile Communications Bert Nordberg as directors to its board.

Among earnings, Sprint edged lower after the telecom company said it continued to lose subscribers in the fourth quarter, though the firm still handed in a smaller-than-expected loss and higher revenue.

Akamai plunged to lead the S&P 500 laggards after the Internet content delivery company handed in a disappointing current-quarter revenue outlook. In addition, at least two brokerages slashed their price target on the firm.

Cigna gained after the insurance company beat earnings forecasts and boosted its outlook for the year, thanks to a solid increase in membership and cost controls.

DeVry surged after the for-profit education company blew past earnings expectations and JPMorgan raised its rating on the firm to "neutral" from "underweight." Other for-profit education companies also gained, includingApollo Group and Corinthian Colleges.

New York Times soared after the newspaper company posted higher sales, thanks to a growth in digital subscribers.

Credit Suisse edged higher even after the financial services company posted results that missed forecasts. Meanwhile, CEO Brady Dougan told CNBC the Swiss bank will continue to cut costs aggressively as it seeks to keep profits stable.

Alcatel-Lucent posted a loss for 2012 and reported that CEO Ben Verwaayen will step down once the telecommunications group has found a successor.

Activision Blizzard, Hasbro, LinkedIn and Coinstar are among notable companies slated to report earnings after the closing bell.

On the economic front, weekly jobless claims fell 5,000 last week to a seasonally adjusted 366,000, according to the Labor Department. Meanwhile, productivity fell 2 percent in the fourth quarter, declining by the most in nearly two years, according to the Labor Department's preliminary reading.

And consumer credit gained $14.59 billion in December in a hopeful sign for the economy, topping expectations for $13.4 billion according to a Reuters poll.