U.S. equities closed flat Thursday as investors got ready for key employment data.
The Dow Jones industrial average rose 3 points, with Johnson & Johnson contributing the most gains. The S&P 500 closed above breakeven, with health care leading advancers decliners. The Nasdaq composite eked out a gain.
"This is a market that has encountered some buying exhaustion," said Mark Luschini, chief investment strategist at Janney Montgomery Scott. "I think it's gotten to the point where, to keep going up, you need to keep getting surprised or put a down payment on what the future holds."
The February nonfarm payrolls report is scheduled for Friday at 8:30 a.m. ET. On Wednesday, ADP and Moody's said private companies added 298,000 jobs last month, shattering estimates. Goldman Sachs and UBS subsequently raised their estimates for Friday's report following ADP's blowout number.
But Andrew Chamberlain, chief economist at Glassdoor, said that pace of jobs creation was not sustainable at this stage. "When you have low unemployment, it puts a ceiling on how many more jobs you can add," he said.
Friday's report will be key for Wall Street as it looks for one more item confirming the Federal Reserve will raise rates next Wednesday.
"If we are holding them at their word, ... then in all likelihood they're going to hike," said Phil Orlando, chief equity strategist at Federated Investors. "I think the Fed is going to take advantage of the environment while nobody's really looking."
Market expectations for a rate hike next week have skyrocketed in recent weeks amid hawkish Fed rhetoric and solid economic data. According to the CME Group's FedWatch tool, March rate hike expectations were 90.8 percent.
"Now the question is does the Fed raise rates three times or more," said Jeff Zipper, managing director of investments at the Private Client Reserve of U.S. Bank. "It does look like the market is priced in for three rate hikes at this time."
U.S. Treasurys extended losses in afternoon trade, with the benchmark 10-year note yield climbing above 2.6 percent.
"The payroll data is definitely a part of it," said Lisa Hornby, fixed income portfolio manager at Schroders. "There's definitely optimism on that front." She also said U.S. Treasurys were following the move lower in European bonds.
On the data front Thursday, initial jobless claims bounced back from 44-year lows, with import prices rising 0.2 percent.
Equities in the U.S. have been on a tear since the presidential election, but have shown some weakness this week. The Dow and S&P have posted losses in every session this week, while the Nasdaq only managed to eke out a slight gain Wednesday.
"We're basically constructive on the market, but think a consolidation in the near term could take place," said Mariann Montagne, senior investment analyst at Gradient Investments.
Overseas, the European Central Bank kept interest rates unchanged, as was widely expected. President Mario Draghi said in a news conference that while some sentiment indicators suggest the region's recovery may be gaining steam, "measures of underlying inflation remain low."
"If the outlook becomes less favorable, ... we stand ready to increase our asset purchase program in terms of size and/or duration," Draghi said.
The euro rose about 0.4 percent against the U.S. dollar and briefly broke above $1.06. "Draghi highlighted that the ECB had removed the part of its statement that referenced 'to use all instruments' necessary, saying there was no 'urgency' to take further action," said Jasper Lawler, senior market analyst at London Capital Group, in a note.
European equities traded higher, with the pan-European Stoxx 600 index gaining 0.08 percent.
The Dow Jones industrial average rose 2.46 points, or 0.01 percent, to close at 20,858.19, with Johnson & Johnson leading advancers and Caterpillar the top decliner.
The gained 1.89 points, or 0.08 percent, to end at 2,364.87, with health care leading five sectors higher and real estate the top decliner.
The Nasdaq composite advanced 1.25 points, or 0.02 percent, to close at 5,838.81.
About three stocks declined for every advancer at the New York Stock Exchange, with an exchange volume of 882.32 million and a composite volume of 3.704 billion at the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 12.35.
—Reuters contributed to this report.
On tap this week:
Earnings: Ulta Beauty, El Pollo Loco, Signet Jewelers, Embraer
Earnings: The Buckle, Vail Resorts
8:30 a.m. Employment report
2:00 p.m. Federal budget