U.S. stocks closed near the flatline on Thursday as investors looked ahead to a key employment report.
"I think a large part of it is a good jobless claims number, which certainly gives more weight to tomorrow's jobs report," said Eric Wiegand, senior portfolio manager at the Private Client Reserve at U.S. Bank.
The Dow Jones industrial average closed about 10 points lower, with Wal-Mart and American Express contributing the most losses. The S&P 500 closed just above the flatline, with materials leading advancers and health care the top decliner. The Nasdaq composite dropped 0.17 percent, as the iShares Nasdaq Biotechnology ETF (IBB) fell more than 2 percent.
The three major indexes had traded further below the flatline earlier in the session, with the Dow falling 118.06 points at session lows.
SPX intraday chartSource: FactSet
The Labor Department is scheduled to release its September jobs report on Friday, with economists polled by Reuters expecting the U.S. economy to have added 175,000 jobs and unemployment holding steady at 4.9 percent.
"The market is processing the likelihood of a Fed rate hike. If you look at the yield curve, it's higher. I think investors looking for yield are reconsidering some of their holdings," said Kim Forrest, senior equity analyst at Fort Pitt Capital.
"We expect jobs growth to continue in health care, tech and finance," said Andrew Chamberlain, chief economist at Glassdoor, adding he expects the U.S. economy to have added 176,000 jobs last month. "The labor market is very strong. This is pretty unusual heading into an election." "Such low unemployment numbers are talking some of the most pessimistic talking points off the table."
The jobs report will come on the back of upbeat U.S. data released Wednesday, including the strongest print on the ISM non-manufacturing index for the year. On Thursday, weekly jobless claims fell to 249,000.
"A weak Jobs Report on Friday would erase any of the positive sentiment gained with yesterday's strong number," said Jeremy Klein, chief market strategist at FBN Securities.
"Using ADP's estimate of Private Payrolls as a guide, employers apparently added +158K workers in September albeit the government's official release could differ greatly. While the FOMC would prefer a bigger boost to hiring, such a print would clear the hurdle necessary to add restrictive measures for only the second time in a decade given that the Core PCE has risen to its most elevated point in twenty-three months," he said.