After Thursday's huge selloff in the stock market, investors are now turning their attention to the October jobs report.
The monthly employment data is always closely watched, but Friday's report, due at 8:30 a.m. ET, will take on even more importance.
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That's because the Federal Reserve, which cut interest rates again on Wednesday, signaled that it probably won't ease further unless there is a significant worsening of the economy.
But while economic data released this week painted a rosier than expected picture of the job market, some remained skeptical amid signs that broader indicators are weakening.
"There's still a lot of concern and I think there's a lot of skepticism not only as it regards the data but also the Fed's statement Wednesday," said John Brady of MF Global, whocounts himself among those looking for a lower number from the jobs report. "If you look at some of the underlying numbers ... there seems to be some trends where employment growth is slowing."
"We think the job market is relatively soft and getting softer."
Bad Is...Bad
Should the jobs number disappoint, that likely would send stocks down again, but also could cheer some hoping for another rate cut when the Fed meets again in December.
But many remain pessimistic on the possiblity of another cut, and until then will have to rely exclusively on economic reports and earnings as a guide.
"Now we’re going to have to start looking at economic data and actually reacting to bad news as bad news, as opposed to bad news is good because the Fed is going to cut rates," said Arthur Hogan, managing director at Jefferies.
Friday's report is expected to be fairly benign, with nonfarm payroll growth estimated at 85,000 jobs, compared with 110,000 in September. Still, any number significantly below the estimate could spark more selling in the markets.
The employment report is "going to be important for two reasons," said Elizabeth Rose, Van der Moolen specialist. "One, we're going to see the state of the economy. Two, we're going to see if (Fed Chairman Ben) Bernanke is doing a good job or not. It's going to reaffirm whether a rate cut is a good idea or if people are going to start to question them."
The markets are especially jittery after Thursday's sharp selloff, where the Dow plunged 362 points. The slide was triggered by growing worries about the credit problems spreading to Citigroup and other big financial institutions.
Bank Is Downgraded
Citigroup was downgraded by CIBC World Markets because of worries about having enough capital. The Citigroup news was compounded by results from Credit Suisse, which said its third-quarter earnings were wiped out by subprime writedowns. (More on Credit Suisse's writedown here).
CIBC also downgraded Bank of America, saying it sees a diminished revenue outlook for the bank. In addition, Credit Suisse cut its rating for Citigroup.
"Let's face it, we got a pretty big downgrade on the banks by CIBC. We know there's more to come there," Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC in Greenwich, Connecticut, told Reuters.
"Rate cuts don't cure past mistakes," said Gary Townsend, a banking analyst at Friedman Billings Ramsey & Co. in Arlington, Va., told Reuters. "To the extent banks have not lent wisely, such as in subprime mortgages or some residential construction in Florida, those loans may already be bad now."