Stocks edged up on Thursday, rebounding from Wednesday's steep losses, but trading was choppy as nervous investors reacted to headlines painting a mixed picture of Europe's debt crisis.

Wall Street was initially boosted by news that the European Central Bank was buying Italian bonds. But gains quickly erased as French bond yields surged on concerns about the nation's credit rating.

Stocks rose again at midday after Standard & Poor's rating agency said a technical error caused a message to be sent suggesting France's credit rating had been changed. S&P said This is not the case and it was investigating the cause of the error.

People are manic and they have every reason to be. It's the combination of Europe, the continued uncertainty in the economy and lingering concerns about a recession, said James Dailey, chief investment officer at TEAM Financial Managers in Harrisburg, Pennsylvania.

The situation in Europe is that there are like 17 chefs in the kitchen plus the ECB. You just don't know what they will do and that just multiples the complexity.

The Dow Jones industrial average <.DJI> was up 71.75 points, or 0.61 percent, at 11,852.69. The Standard & Poor's 500 Index <.SPX> was up 5.16 points, or 0.42 percent, at 1,234.26. The Nasdaq Composite Index <.IXIC> was down 4.90 points, or 0.19 percent, at 2,616.75.

The S&P 500 fell 3.7 percent on Wednesday, its worst daily percentage drop since August 18. Just last month the index recorded its best monthly performance in 20 years on optimism European leaders were taking control of the debt crisis.

Thursday's economic data showed new U.S. jobless claims declined for the second straight week to the lowest level since April, while the trade deficit unexpectedly shrank in September to its narrowest level since December.

Cisco Systems Inc jumped 6.6 percent to $18.78 after the world's biggest networking equipment maker reported earnings that beat estimates and forecast revenue and profit above expectations.

But pressuring the Nasdaq, Green Mountain Coffee Roasters Inc slid 37.4 percent to near $41.93 after quarterly revenues came in less than expected, raising fears about the company's growth potential.

Apple shares were down 3.2 percent at $382.53.

Italy paid its highest yield in 14 years to sell 12-month debt in an auction. While there was relief the sale went smoothly, worries festered that Italy's borrowing costs were unsustainable.

In Greece, former European Central Bank vice president Lucas Papademos was appointed to head the country's new crisis coalition.

(Reporting by Angela Moon; editing by Kenneth Barry)