By Caitlin Ostroff and Michael Wursthorn

The S&P 500 hugged the flatline Thursday afternoon as the broad index flirted with a third straight day of losses.

The S&P 500 recovered from a nearly 1% drop earlier in the session and was recently trading up 0.1%. Stocks closely tied to an economic recovery led the rebound while some ongoing weakness among high-growth stocks and shares of energy companies held back the S&P 500 and other major indexes from moving meaningfully higher.

Thursday's give and take is the latest episode in a volatile stretch of trading over the last month. Signs of a resurgent economy, rising interest rates and nascent inflation have spurred a massive rotation into value stocks. These stocks benefit from an economic rebound, such as shares of manufacturers, banks and retailers. Meanwhile, investors have been pulling money out of tech companies, viewing those high-priced stocks as particularly vulnerable to the shifting economic winds.

Thursday's sliver of gains wasn't a sign that the volatility was nearing an end, analysts said. Instead, several say investors should be bracing for more topsy-turvy sessions.

"From here, you could have in aggregate flattening markets. We're going to be looking for a new narrative," Daniel Morris, chief market strategist at BNP Paribas Asset Management. "Growth could recover, value could wait, and then on the surface nothing happens. I have modest expectations for the market until we get a sense of what the next catalyst is."

Not helping tech stocks was a congressional hearing on online disinformation. The chief executives of Facebook, Twitter and Alphabet all appeared before a House panel Thursday to face questions from lawmakers on their companies' roles in the discord that led up to and has followed the Jan. 6 Capitol riot, among other matters.

Shares of those three companies were mostly in the red ahead of the hearings and remained there in recent trading.

Similar to the S&P 500, the Dow Jones Industrial Average was recently up about 70 points to 32486. The Nasdaq Composite traded down about 0.3%, underscoring the weakness in tech, a day after tumbling 1.7%.

One brighter spot was shares of smaller companies. After several days of declines, the Russell 2000 index fell further Thursday morning, putting it into correction territory, defined as a drop of 10% or more from a recent high. But investors appeared to found those prices more appealing, pushing the Russell up 1.5% in recent trading.

Some of Thursday's initial weakness followed comments from Fed Chairman Jerome Powell and new jobless data ahead of the market's open. The data and comments appeared to support the idea that the central bank would eventually ease up on its stimulative efforts.

Speaking on NPR Thursday morning, Mr. Powell said the central bank would gradually roll back the amount of Treasurys and mortgage-backed securities that had been bought by the Fed. He added that such a move would only come once the economy has all but fully recovered, but investors reacted immediately, sending stock futures lower ahead of the market's open.

Data also showed that new jobless claims last week fell to their lowest level since the pandemic disrupted the economy -- highlighting how portions of the economy continue to recover as Covid-19 vaccines roll out. The number of Americans applying for first-time unemployment benefits dropped to 684,000, down from 781,000 in the prior week.

That all translated into a stock market that remains bifurcated between growth and value stocks.

In the value group, shares of banks, material firms and utilities rose about 1% each. Industrial companies added 0.9%. Real-estate and consumer staple stocks gained about 0.5% each.

Growth stocks, meanwhile, continued to struggle despite narrowing their losses from earlier in the day. Tech stocks in the S&P 500 slid 0.3% and shares of communications companies shed 0.4%.

Energy stocks faced their own problems, falling 0.6% amid another drop in crude oil prices.

Overseas, the Stoxx Europe 600 closed flat. In Asia, most major benchmarks closed higher. Japan's Nikkei 225 rallied 1.1% and South Korea's Kospi added 0.4%. China's Shanghai Composite Index edged down 0.1%

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Michael Wursthorn at Michael.Wursthorn@wsj.com

(END) Dow Jones Newswires

03-25-21 1412ET