U.S. stocks were little changed, recovering from an earlier slump, as investors dissected better- than-forecast employment data and prospects for profit growth before the start of earnings season next week.

U.S. employers added 200,000 workers to payrolls in December, Labor Department figures showed in Washington, more than the 155,000 gain projected in a Bloomberg News survey. The unemployment rate unexpectedly fell to 8.5 percent, the lowest since February 2009. However, the growth in payrolls did not beat estimates by as wide a margin as data from ADP Employer Services yesterday that helped trigger gains in equities.

Equities also dropped earlier as German factory orders fell 4.8 percent, the biggest decline in almost three years, fueling concern that Europe was heading into a recession.

Most U.S. stocks rose yesterday as banks rallied and payrolls climbed, offsetting reduced profit forecasts at companies including Target Corp. and J.C. Penney Co.

Financial companies pared steeper losses. Bank of America Corp. (BAC) retreated 0.2 percent after dropping 5 percent earlier.

General Electric Co. (GE) and Microsoft Corp. (MSFT) climbed at least 1 percent to lead gains among the largest companies.

Alcoa Inc. (AA), due to start the earnings season on Jan. 9, slid 2.1 percent after saying it will close 12 percent of its smelting capacity.