NEW YORK (CNN/Money) - U.S. stocks closed flat to lower Wednesday, erasing most of the session's losses after the price of crude oil turned around, tumbling more than a dollar.

While oil prices are bound to remain in focus for the next few sessions, the market will also be focused on Friday's monthly employment report.

The Dow Jones industrial average (up 6.27 to 10,126.51, Charts) closed just above unchanged and the Standard & Poor's 500 (down 1.06 to 1,098.63, Charts) index closed just below unchanged.

The Nasdaq composite (down 4.36 to 1,855.06, Charts) closed a few points lower, having recovered from a nearly 1 percent decline through the early afternoon.

Stocks tumbled in the morning as oil prices surged, made a late-afternoon attempt at a rally as crude prices cooled, and ultimately ended the session not far from unchanged.

"Obviously, the market is going to remain susceptible to oil prices. And any time you get a crack in the price of oil, you're going to see some stock reaction," said Peter Cardillo, chief market analyst at S.W. Bach & Co. "But I think the market is beginning to take a less negative attitude toward the price of oil."

After hitting a new all-time high overnight of $44.34 and trading not far from that in the morning, crude oil started scaling back in the afternoon. Leading the turnaround in prices was a weekly U.S. government report showing higher-than-expected crude inventory stocks and news that embattled Russian oil company Yukos will be able to use its bank accounts to keep exports moving.

NYMEX light crude oil futures settled at $42.83 a barrel, down $1.32.

The market has been vulnerable to the rise in oil prices for some time, but this week in particular stocks have moved in tandem with the commodity, which has tested new all-time highs on an almost daily basis. In the longer term, investors fear persistently high energy prices could feed inflation and cut into corporate profits, consumer spending and the pace of the economic recovery.

However, there are other worries weighing on the market right now in addition to oil prices, said Art Hogan, chief market analyst at Jefferies & Co. Chief among them is the labor market.

Hogan said that despite expectations for a strong employment report Friday, there are indications the labor market is not accelerating as much as it had been in the second quarter. He said Tuesday's employment survey from Challenger, Gray & Christmas flies in the face of what analysts are expecting to hear Friday.

Due before the start of trading Friday, the July report is expected to show that employers added nearly 245,000 jobs to their payrolls after June's less impressive addition of 112,000 jobs.

Ahead of that, investors will take in the weekly jobless claims report before the bell Thursday. The number of Americans filing new claims for unemployment is expected to have fallen to 340,000 last week, according to Briefing.com, from 345,000 the previous week.

In addition to worries about oil and employment, some tech and telecom earnings warnings weighed on sentiment Wednesday

InterActiveCorp. (IACI: down $4.23 to $22.80, Research, Estimates) plunged 15.6 percent and topped the Nasdaq's most-active list after the parent of Expedia.com and Hotels.com warned that its 2004 results would hit the bottom end of its previous range. The company also posted quarterly earnings that beat expectations on a per-share basis but missed on revenue.

InterActiveCorp.'s decline weighed on Yahoo! (YHOO: down $1.24 to $27.91, Research, Estimates) and other Internet stocks.

Telecom gear maker Ciena (CIEN: down $0.68 to $2.08, Research, Estimates) was the Nasdaq's second-most active, tumbling 24.6 percent after warning that third-quarter sales would miss predictions due to what it called an environment of uncertainty. Following the news, J.P. Morgan downgraded the stock to "underweight" from "neutral."

Internet ad firm ValueClick (VCLK: down $2.63 to $7.16, Research, Estimates) tumbled 26 percent after warning that third-quarter results would miss forecasts.

But other tech stocks and sectors bounced, balancing the downdraft, including Oracle (ORCL: up $0.28 to $10.84, Research, Estimates) and Sun Microsystems (SUNW: up $0.08 to $3.84, Research, Estimates).

Honeywell (HON: down $0.34 to $36.66, Research, Estimates) lost less than 1 percent, recovering from a steeper loss in the morning after UBS downgraded it to "reduce" from "neutral" on concerns about valuation and whether the company can hit its 2005 earnings targets.

Market breadth was negative. Losers topped winners by a narrow margin on the New York Stock Exchange, on volume of around 1.37 billion shares. On the Nasdaq, volume hit 1.66 billion shares and decliners beat advancers eight to seven.

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On the upside, reports on factory orders and the services sector of the economy beat expectations and rose from previous reads.

Released just after the open, factory orders rose 0.7 percent in June, after rising an upwardly revised 0.4 percent in May. Economists surveyed by Briefing.com expected orders to rise 0.5 percent.

The Institute for Supply Management's services sector index for July rose to 64.8 from 59.9 in June, beating expectations for a rise to 61.5.

Treasury prices crept higher, with the 10-year note yield at 4.42 percent. The dollar rose versus the yen and was little changed versus the euro.

COMEX gold fell $1.80 to settle at $394.70 an ounce.