Stocks closed a listless trading session unchanged on Thursday as cautious investors stayed on the sidelines ahead of Friday's release of monthly employment data.
"If we can continue to hold up after the payroll report and through the end of of the month ... then the message from the market would be that the underlying strength of the economy and the Fed rate cuts have won the day," said William Strazzullo, chief market strategist at Bell Curve Trading.
"But I think it's too early to declare that victory," he said.
Strazzullo said his firm is advising clients to book profits and take a step back given the sharp market rally following the Sept. 18 Fed rate cut.
"If all the talk about recession, slowdown in consumer spending, weak labor markets and continued downturn in housing is correct, we really shouldn't trade much higher than here," he said.
Government data on weekly jobless claims showed a slightly higher number of workers seeking unemployment benefits came in slightly higher than expected but failed to move the market significantly. A report showing a steeper-than-expected drop in August factory orders had little impact on the market.
The jobless claims number was closely watched for an indication of what to expect from Friday's key monthly employment report. Many investors believe the jobs data will determine the Federal Reserve's next interest rate policy move, and ultimately, the stock market.
"The Fed is going to key off tomorrow's report as to whether or not they should cut again," said Vince Farrell of Scotsman Capital. "I'm guessing that the report is going to be a little bit stronger than you would think and the Fed is not going to cut interest rates."
U.S. Treasury prices rose on Thursday following the drop in factory orders, sending yields higher.
In the banking sector, a report that Citigroup may contribute with financing for the buyers of beleaguered U.K. bank Northern Rock pushed the U.S. bank's shares down 0.7% in European trading while Northern Rock shares jumped 14%.
Merrill Lynch said Wednesday its head of global fixed income, currencies and commodities left the company. Merrill tapped David Sobotka to take over for Osman Semerci.
Shares of Marriott International fell after the hotel operator reported a lower profit and forecast future earnings below Wall Street expectations.
Citigroup shares rose after the Financial Times said the firm was in talks with private equity firm Kohlberg Kravis Roberts on funding for the purchase of some of the leveraged loans on its balance sheet.
Shares of Isis Pharmaceuticals rose after a mid-stage trial showed an experimental drug further reduced "bad" LDL cholesterol in people already getting aggressive treatment for dangerously high levels of the artery clogging substance.