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* Apple shares fall 1.4 percent after setback in Samsung case
* Sprint volume surges, shares jump on Softbank deal reports
* Citigroup sees US stocks as "overweight"
* Indexes: Dow up 0.14 pct, S&P up 0.28 pct, Nasdaq up 0.10 pct
By Atossa Araxia Abrahamian
NEW YORK, Oct 11 (Reuters) - U.S. stocks erased most gains and were little changed on Thursday as a drop in Apple shares after a legal ruling dented broad market gains on a sign of improvement in the jobs market.
Apple shares fell 1.4 percent to $632.25 after a U.S. appeals court overturned a preliminary injunction on the sale of Samsung Electronics Co Ltd's Galaxy Nexus smartphone, dealing a blow to Apple Inc in a battle against Google Inc's increasingly popular mobile software.
"The tone was positive before the claims data, so it gave us a nice boost. But the reality sets in that these are just one week's figures and are subject to revision, so people have turned back to some profit-taking," said Tim Ghriskey, chief investment officer at Solaris Asset Management, Bedford Hills New York.
"We are still at a very early cycle of earnings so there is not much to take the market to the upside."
Earlier data showed initial jobless claims fell to their lowest in more than four and a half years, dropping by 30,000 to a seasonally adjusted 339,000, against the 370,000 economists had predicted.
In addition, Citigroup upgraded its stance on U.S. equities to "overweight," citing cheap equity valuations and aggressive central bank actions to stimulate the economy. Citigroup expects global equity markets to rally 9 percent by the end of 2013.
Sprint Nextel shares jumped 13 percent to $5.70 on news that Japan's Softbank Corp may buy a majority stake in the wireless carrier. Clearwire Corp, in which Sprint holds a majority interest, surged 38 percent to $1.79. MetroPCS shares dropped 4.2 percent to $11.53
"The Sprint-Nextel deal shows there are deals to be had. Companies are looking to find ways to grow their footprint even in this economy," said Brian Amidei, managing director and partner at wealth management firm HighTower Advisors.
Sprint share trading hit record volumes before slowing down in the early afternoon and tempering the market's earlier gains.
The Dow Jones industrial average was up 17.93 points, or 0.13 percent, at 13,362.90. The Standard & Poor's 500 Index was up 4.02 points, or 0.28 percent, at 1,436.58. The Nasdaq Composite Index was up 3.04 points, or 0.10 percent, at 3,054.83.
S&P 500 fell 2 percent over the past four days - its biggest decline in four days since July. Analysts point to the long-term economic outlook, and concerns about slowing world growth.
"Markets hate ambiguity, and today's trading patterns are a good example of the larger ambiguous picture in the global economy," said Steven Baffico, chief executive officer at Four Wood Capital Partners in New York. "We are hyperreacting to both good and bad."
The jobless claims report follows a report last week that showed September's unemployment rate unexpectedly fell to 7.8 percent.
Truck manufacturer Oshkosh rallied 12 percent on news that investor Carl Icahn had offered to buy all of its shares for $32.50 a share. OshKosh advised shareholders to take no action until further notice
Shares of supermarket chain Safeway Inc fell nearly 5 percent after it posted quarterly sales of $10.05 billion, missing Wall Street's $10.24 billion target. Competitor Walmart was up 0.5 percent to $75.74 after hitting a 52-week high on Wednesday and JC Penney had its best day since late January, jumping 7 percent to $25.80 per share.