By Anora Mahmudova and Barbara Kollmeyer, MarketWatch

NEW YORK (MarketWatch) -- The U.S. stock market fell, but ended well off the day's lows, as a decision by one of Portugal's biggest banks to delay a debt payment reminded investors of the fragility of Europe's banking system.

Investor worries centered on Espirito Santo Financila Group SA, although those worries seemed to abate over the course of the trading session. Also read: 5 things to know about Banco Espirito Santo and Europe.

Meanwhile, U.S. economic data continued to show an improving economy. The number of people who applied for unemployment benefits in the first week of July fell to a seven-year low.

The S&P 500 (SPX) closed down 8.12 points, or 0.4%, to 1,964.71. The Dow Jones Industrial Average (DJI) dropped as much as 180 points at session lows, but ended the day down 70.35 points, or 0.4%, at 16,915.20. The Nasdaq Composite (RIXF) lost 22.83 points, or 0.5%, to 4,396.20.

Read the recap of MarketWatch's live blog of today's stock-market action

Steven Wieting, global chief investment strategist at Citi Private Bank, played down the concerns about Portugal for U.S. stocks. He said investors are just using downbeat economic and banking news from Europe and Asia as an excuse to sell.

"The reality is that we had a 6% rally in just six weeks, and markets were looking for an excuse to correct. Nothing has changed fundamentally, neither in the U.S., nor in Europe," Wieting said. "Rising markets tend to ignore single data points, but in falling markets, fear gets amplified that someone else will sell."

Still to come is the first major speech from Stanley Fischer as vice chairman of the Federal Reserve. The speech, at 4:30 p.m. Eastern in Cambridge, Mass. will focus on financial reform.

On Friday, the earnings season kicks off in earnest as Wells Fargo & Co.(WFC) reports before the opening bell. Read: Here's what investors can expect from Wells Fargo earnings.

European stocks sell off; gold rises

In overseas markets, the Stoxx Europe 600 index closed lower for a fifth day, dropping 1.1% as banks tumbled after Espirito Santo Financial Group SA , the controlling lender of Banco Espirito Santo SA , suspended trading its own shares and bonds, citing "ongoing material difficulties."Also Read: Portuguese government yields soar amid banking turmoil

Unexpected drops in industrial production in May in both Italy and France also weighed on sentiment.

The Nikkei 225 index fell 0.6%, but other Asian markets were flat or slightly higher. Chinese exports for June rose 7.2% in June from a year earlier, far below the 10% rise expected from economists surveyed by The Wall Street Journal.

Gold futures (GCQ4) jumped sharply to their highest settlement in nearly four months.

Oil prices rebounded on Thursday, with the U.S. benchmark putting an end to a losing streak that spanned nine sessions, while the dollar(DXY) stayed higher.

United Continental rallies; Potbelly plunges on earnings

United Continental Holdings Inc. (UAL) shares leapt 7.1% after the company's revenue per available seat mile, a closely watched sales metric in the airline industry, increased by 3.5% in the second quarter from a year earlier.

TRW Automotive Holdings Corp.(TRW) jumped 7.9% after the auto-parts maker confirmed it has received a nonbinding buyout offer and said it is evaluating the bid as well as other options.

Lumber Liquidators Holdings Inc. (LL) slid 21% after the hardwood-flooring retailer slashed its outlook for the year.

Potbelly Corp. (PBPB) shares dropped 23% after the sandwich shop chain warned of weaker-than-expected sales in the second quarter late Wednesday. (Read more about the biggest movers here: http://www.marketwatch.com/column/movers%20%26%20shakers.)

More must-reads from MarketWatch:

7 signs a 10%-plus drop may be coming for stocks

Ending unemployment benefits didn't cut jobless rate

Jeff Reeves: 7 signs a 10%-plus drop may be coming for stocks

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