After a difficult day for the US economy and stocks, investors have yet another worry before the long holiday weekend: Friday's jobs report.
The economy is expected to have lost another 110,000 jobs in June after a 431,000 increase in May, according to the median of forecasts from analysts polled by Reuters. The unemployment rate is expected to tick up to 9.8 percent from 9.7 percent.
"Tomorrow could be a very painful day for data as the unemployment rate could tick up," said Joseph Battipaglia, market strategist for Stifel Nicolaus. "None of the data is good for the bullish camp, which was expecting a V-shaped recovery for the rest of the year."
A rash of bad economic news on Thursday set a bearish tone for Friday's jobs numbers.
First, the government said jobless claims expectedly rose by 13,000 last week. Then came reports that US manufacturing activity fell whilepending home sales plunged and construction spending declined.
The reports provided the strongest evidence yet that the recovery is slowing and could push the nation back into a recession. Though many analysts doubt that will happen, some market pros remain unconvinced.
"This is clearly pointing to a double-dip recession," said Peter Kenny, managing director at Knight Equity Markets. "The market's attempts at a rally were on life support until this housing and construction data came out. That life support was pulled out on the effort to close higher on the first day of the quarter."
After plunging on the economic news, stocks ended up Thursday with only modest losses. The Dow Jones Industrial Average closed down 41.49, or 0.4 percent, after being down more than 150 earlier. The S&P 500 shed 0.3 percent and the Nasdaq lost 0.4 percent.
The CBOE volatility index, widely considered the best gauge of fear in the market, fell back below 33 after topping 36 earlier.
Meanwhile, the outlook for economic growth is turning gloomier.
JPMorgan Chase economist Michael Feroli cut his growth forecast for the third quarter to an annual rate of 3 percent from 4 percent, citing tighter government spending. Other economists expect growth to slow to an anemic 2 percent in the second half of this year.
All that is making investors jittery going into Friday's report.
"We would expect, if anything, the risks tomorrow are skewed to a consensus or slightly off-consensus payrolls print,'' said Ian Lyngen, senior government bond strategist at CRT Capital Group. "There's the risk of a bearish correction.''
Of course, some pros think the market is already oversold and could withstand a bad jobs report—as long as it's not too far off expectations. There are even those who think stocks could rally if the numbers are close to forecasts or even better.
Still, economic worries abound. The recovery so far has been fueled mostly by government stimulus spending, manufacturing activity and business spending on new equipment and inventories—and those factors are fading.
Senate Republicans, expressing concerns about the ballooning federal deficit, this week blocked a bill that would have kept unemployment checks going to people who have been laid off for long stretches.
That left more than 1.3 million people without federal jobless benefits. And the number could grow to 3.3 million by the end of the month if lawmakers can't resolve the impasse when they return from the July 4th recess.
Less money in people's pockets could hamper economic growth.
—Reuters and AP contributed most of the reporting for this article.