U.S. stocks closed higher on Thursday as investors awaited the key April jobs report and eyed easing in oil prices and bond yields. (Tweet This)
"Seems like we have a little bit of a reversal going on here," said Jack Ablin, chief investment officer at BMO Private Bank. "Investors probably want to see a jobs report before a strategy change."
The Dow Jones industrial average closed about 80 points lower after briefly gaining more than 100 points. The blue chip index remained below the psychologically key level of 18,000. The Nasdaq also held below 5,000. The S&P 500 failed to break resistance at 2,093, a level highlighted by BTIG's chief technical strategist Katie Stockton.
Thursday's gains marked a rebound from the last two days' selloffs in both the bond and equity markets.
"We've got more of a safe haven trade here in the U.S.," Ablin said, noting weaker yields and oil prices, with slight gains in the dollar.
He expects a slight disappointment in the monthly employment report, with creation of fewer than 200,000 jobs. The key point for most analysts is wage growth, which could indicate an increase in inflation and support an interest rate hike.
Analysts polled by Reuters expect Friday's report to show the creation of 224,000 jobs in April, with unemployment lower at 5.4 percent.
Scott Clemons, managing director and chief investment strategist at Brown Brothers Harriman, also expects more than 200,000 jobs. "If the jobs number jumps to 300,000 that would lead people to conclude the Fed would be more likely to raise rates in June," he said.
"It still seems to me to be a market in which every little data point is going to be interpreted at the margin for its impact on an interest rate hike," Clemons said.
Initial claims for state unemployment benefits rose 3,000 to a seasonally adjusted 265,000 for the week ended May 2, the Labor Department said on Thursday. Claims for the prior week were unrevised at 262,000, which was the lowest reading since April 2000.
"For the time being markets are going to cheer good data," said John Canally, investment strategist and economist at LPL Financial. "I think we get a nice solid (jobless claims) report, a 250,000-plus reading—all market friendly enough to convince the market that the first quarter was transitory but not hot enough for the Fed (to raise rates soon)."
Art Hogan, chief market strategist at Wunderlich Securities, said low weekly claims could be a sign that Friday's jobs report for April could come in better than expected. In March, the U.S. added 126,000 jobs versus and expected 245,000.
To be sure, Wednesday's ADP report showed the U.S. private sector added 169,000 jobs, the fewest since January 2014. The report is not necessarily correlated with the U.S. Bureau of Labor Statistics' data due Friday.
"I don't think we'll get the snap back all in one month and I think the market is expecting this, too," LPL's Canally said. He noted encouraging signs from the long-term decline in claims since November. A gain of more than 75,000 over the same time period would have indicated an economy very close to or in a recession.
In another relief for the stock market, Treasurys paused their accelerated rally with bond yields coming off morning highs.
The benchmark U.S. 10-year Treasury note yields traded near 2.18 percent after hitting a high of 2.27 percent. Thirty-year bond yields traded around 2.91 percent after topping 3 percent, a four-month high.
In Europe, German 10-year Bund yields held near 0.59 percent after nearly hitting 0.8 percent.
Read More11 reasons why the Bund turned nasty
The Dow transports gained more than 1 percent with low oil prices helping airline stocks as nearly all index constituents advanced.
Oil prices eased from highs for 2015 but remained about half the peak levels of last summer.
U.S. oil futures remained up slightly for the week. Natural gas inventories rose by 76 billion cubic feet, in line with expectations.
The energy industry remains sensitive. Layoffs in the U.S. hit a three-year high in April as energy sector employers announced a fresh wave of job cuts, according to a report from Challenger, Gray & Christmas.
Still, the sector could benefit in the near future from stabilization in oil. "I think we may be at a sweet spot where consumers will benefit from lower oil prices, but companies won't lay off people like they were a few months ago," said Randy Frederick, managing director of trading and derivatives at Charles Schwab.
In other economic news, Chicago Fed President Charles Evans said the central bank should hold off on raising interest rates. "There are uncertainty reasons to sort of make you say, 'Why should you be in a rush to do this,'" he told CNBC's "Squawk Box" in an interview.
In corporate news:
Yelp surged 23 percent, extending gains after a halt in trading, after Dow Jones reported the restaurant and entertainment listings and ratings site was exploring a sale.
Alibaba jumped 7.5 percent, its best day ever, after reporting earnings of an adjusted 48 cents per share for its latest quarter, 6 cents above estimates, and revenue also beat Street forecasts. Alibaba also announced that Chief Operation Officer Daniel Zhang will become CEO as of May 10.
Priceline Group slid 4 percent despite posting quarterly profit of an adjusted $8.12 per share, above estimates of $7.72, with revenue also beating consensus. The online travel services site cited strong growth in bookings for hotel rooms and rental cars, among other factors.
Procter & Gamble ended off a quarter of a percent.The firm's hair care business—valued up to $5 billion—is drawing interest from a variety of private equity firms, according to the New York Post.
Costco closed down 0.15 percent after reporting flat same-store sales for April, compared to estimates of a 0.3 percent increase.
The closed up 7.85 points, or 0.38 percent, at 2,088.00, with financials and information technology leading nine sectors higher energy the only decliner.
The Nasdaq closed up 25.90 points, or 0.53 percent, at 4,945.54.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded above 15.
About three stocks advanced for every two decliners on the New York Stock Exchange, with an exchange volume of 788 million and a composite volume of nearly 3.7 billion in the close.
The dollar index, which measures the greenback's performance against a basket of currencies, traded higher at about 94.62, with the euro back below $1.13.
Gold futures settled down $8.10 at $1,182.20 an ounce.
European stocks closed flat, paring losses on U.S. data.
On tap this week:
Earnings: Toyota, JD.com, BioCryst Pharma, Liberty Media, AOL, Health Care Reit, NRG Energy, Sirona Dental Systems
8:30 a.m.: Employment report
10:00 a.m.: Wholesale trade
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—CNBC's Peter Schacknow, Matt Belvedere and Reuters contributed to this report.