Investors are anticipating another gloomy reading on U.S. employment on Friday, though market reaction may be somewhat muted.
The Labor Department's report is expected to show a 75,000 net loss in payrolls for April--which would be the fourth straight month of losses--and a rise in unemployment to 5.2 percent from 5.1 percent in March.
In a negative sign ahead of that data, the government said Thursday the number of newly laid off workers filing claims for unemployment benefits soaredby a greater-than-expected 35,000 last week.
However, stock market participants appear to believe they have already taken into account current economic weakness.
With the government sending stimulus checks out to taxpayers and Federal Reserve rate cuts still working their way through the financial system, many investors are confident the economy will rebound in the second half of the year.
"What we're seeing is that maybe the economy is not falling off a cliff, but perhaps leveling off," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners. "I think the Fed (rate-cutting campaign) is over with, even though the Fed's statement didn't say that."
The Fed lowered key interest rates by a quarter-point on Wednesday but suggested inflation is a growing concern and that the economy should keep growing moderately. The statement accompanying the Fed's rate decision was unclear about its policy going forward, but it has been widely believed that the central bank would pause following a string of cuts that lowered rates by 3 percentage points since last summer.
The rally by the dollar and stocks came despite Thursday's report that the number of workers remaining on jobless benefits climbed to a four-year high.
"After seeing an improvement trend much of April, the sudden deterioration at the end of the month is certainly disappointing," said Richard DeKaser, chief economist at National City in Cleveland, Ohio.
Initial claims for jobless benefits increased to a seasonally adjusted 380,000 in the week ended April 26, from a revised 345,000 the previous week. Analysts polled by Reuters had expected claims to rise to 360,000 from an initially reported 342,000.
The four-week moving average of new claims, a more reliable guide to underlying labor trends that irons out weekly fluctuations, fell last week to 363,750 from 370,250.
But the number of workers remaining on jobless benefits jumped to a bigger-than-expected 3.019 million in the week ended April 19. That was the highest level since April 2004.
Analysts were expecting continuing claims to rise to 2.95 million.
"The report certainly does indicate the job market is weaker, though that is not much of a surprise. There have been mass layoffs, especially on Wall Street," said Andrew Richman at Suntrust's personal asset management unit.
Adding to the gloomy jobs picture, a report from the Chicago-based Challenger Gray and Christmas showed a 19-month high in the number of planned job cuts during April and a 68 percent rise from March.
"This is the biggest job-cut month we have seen since the onset of the housing collapse," said John Challenger, who heads the job outplacement tracking firm.
--AP and Reuters contributed to this report.