U.S. stocks might be taking a break from Wednesday's carnage, but the bond market continues to look nervous. After dipping below the 3 per cent threshold, the yield on the 10-year U.S. Treasury bond continued to slide on Thursday in mid-morning trading, to about 2.94 per cent. That marks its lowest point since December. As yields fall, bond prices rise.

The backdrop is still troubling. In Greece, fears of debt default persist even as the European Union's economics commissioner Olli Rehn insisted that the EU would keep the country solvent through September, getting it over a crucial bump.

But U.S. economic news isn't exactly uplifting. While initial jobless claims were slightly lower than expected for the period ended last week, the four-week moving average remains stuck at January levels. Meanwhile, the Philadelphia Fed index fell to -7.7 after economists had expected the regional business conditions report to rise to 7. The employment part of the index was particularly disappointing, falling to 4.1 from 22.1.

"The index is volatile but even so this is a big drop," said Ian Shepherdson at High Frequency Economics. "We hope that over the next couple of months, however, the resilience of consumers persuades businesses that things are not as bad as they feared."

Meanwhile, the CBOE VIX volatility index , widely seen as a "fear gauge", held its level after surging to a three-month high on Wednesday, suggesting that investors remain on edge. However, the S&P 500 is in a world of its own: It was up 0.5 per cent in late-morning trading on Thursday.