Wall Street stocks were mixed in volatile early trade as the US consumer prices report showed that economic slowdown eased inflation pressures and after further quarterly losses at Citigroup (NYSE: C - News) and Merrill Lynch.

Shortly after the opening bell, the S&P 500 was 1.7 per cent higher at 923.73, while the Nasdaq Composite rose 2.1 per cent to 1,662,77 and the Dow Jones Industrial Average was 1.1 per cent higher at 8,675.64. But stocks later dropped into negative territory.

In the previous session, the benchmark S&P 500 index suffered its biggest one-day percentage decline since 1987, weighed down by recession fears.

Citigroup was flat at $16.23 in pre-market trade after the bank reported its fourth straight quarterly loss that was nevertheless smaller than expected.

Merrill Lynch fell 5.7 per cent to $16.21 after the bank, which is being taken over by the Bank of America, reported a worse-than-expected third-quarter net loss of $7.5bn, largely down to writedowns and credit losses on complex debt securities.

A host of regional banks also reported on Thursday. Bank of New York Mellon, Huntington and BB&T added 0.2 per cent to $29.31, lost 4.1 per cent to $8.25 and eased 0.6 per cent to $31.97, respectively.

The rate at which banks lend to each other, measured by overnight dollar Libor, fell from 2.14375 per cent to 1.9375 per cent, closer to the Fed funds target rate of 1.5 per cent. Three-month dollar Libor eased from 4.55 per cent to 4.5025 per cent.

Elsewhere, airlines were likely to be in focus after Southwest reported its first quarterly net loss since 1991. The shares added 3.4 per cent to $11.95 before the bell.

In energy, which was the biggest drag on the S&P in the previous session, Peabody Energy rose 15.5 per cent to $28.00 on the back of well-received third-quarter figures.

In economic news, the number of workers filing new claims for unemployment benefits fell a second-straight time last week due in part to the reduced effect of Hurricanes Ike and Gustav.

European stocks suffered more losses ahead of the open on Wall Street. The FTSE Eurofirst 300 fell 2.6 per cent to 880. Asian equity markets closed down sharply, led by the worst day for Japanese stocks since 1987.

Bond yields were higher. The yield on the two-year Treasury note was up 6 basis points at 1.608 while the 10-year Treasury note was up 5 basis points at 3.992 per cent.

The dollar was mixed against major currencies early in New York, with the greenback standing flat at $1.3472 against the euro, easing 0.4 per cent to $1.7223 against the British pound but rising 0.4 per cent to Y100.20 against the yen.

Gold was trading $6.90 lower at $832.10 per troy ounce.

Oil prices were lower early in New York. US crude prices, which in the previous session dropped below $75 its lowest level since September 2007, were down $1.44 at $73.80a barrel.