Street Flat Early As Rally Fades Ahead of Key Jobs Data Friday

The Street’s recent rally showed signs of a fade early Thursday as investors wait for Friday’s key monthly jobs report. This week has been packed with data, and strong manufacturing, auto sales, construction, and private-sector job growth numbers have helped the market post gains.

The U.S. monthly non-farm payrolls report looms Friday, and consensus is for job gains of 190,000, with unemployment unchanged at 4.9%, according to Briefing.com. On Wednesday, ADP reported private-sector job growth of 214,000 in February, above expectations. Friday’s jobs report comes ahead of the Federal Reserve’s March 15-16 Federal Open Market Committee (FOMC) meeting, where rate policy is set. Although the job gains and unemployment numbers in the report get the headlines, investors are also interested to see where the job gains are coming from. Key sectors include construction, health care, and business services.

Early Thursday, the weekly jobless claims figure came in at 278,000. Economists polled by MarketWatch had expected 270,000.

The S&P 500 (SPX) index charged ahead on Tuesday and Wednesday, helped by an oil market rebound, signs of strength in U.S. manufacturing, and an upward turn in the beaten-down financial sector. Citigroup, Inc. C rose 2.3% Wednesday after a 6.2% rise Tuesday, and another financial stock, Prudential Financial, Inc. PRU, rose slightly Wednesday, building on Tuesday’s gains. The rally in financials came as U.S. interest rates rose to nearly one-month highs. Recently, the U.S. 10-year Treasury yield was at just over 1.85%, up from lows below 1.7% recorded last month.

Over in the oil market, prices were little changed early, but remained near two-month highs. U.S. oil inventories reached a record high this week of nearly 518 million barrels, the U.S. Energy Information Administration (EIA) said Wednesday, but there’s a sense among some market watchers now that the glut can be eaten through more quickly.

The CBOE's Volatility Index (VIX), which tracks market volatility, was lower early Thursday. Some market watchers tend to keep an eye on VIX ahead of employment reports for signs of growing concern.

Fed’s Beige Book Shows More Growth: The Fed’s Beige Book, issued Wednesday, showed continued evidence of U.S. economic growth across the 12 Federal Reserve districts during the period it covered from early January until late February. “Economic activity expanded in most districts,” the Fed said in its summary. “Consumer spending increased in the majority of districts.” However, the Fed said, manufacturing activity was flat overall, with conditions varying in different districts. Many districts reported that the strong dollar and weakening global outlook had negatively affected exports. The Fed noted that labor market conditions continued to improve, wage growth ranged from flat to strong, and most districts reported steady consumer prices. The report comes two weeks before the Fed’s March 15-16 policy meeting, at which interest rate policy will be determined. The Fed is closely watching inflation, with a 2% target rate.

Fed’s Williams Discusses Outlook: Speaking of the Fed, San Francisco Fed President John Williams told reporters Wednesday there has been no substantial change in his outlook on the U.S. economy or his opinion on the number of times the Fed should raise interest rates this year and next, Reuters reported. The Fed raised interest rates in December for the first time since 2006, and signaled it would probably raise rates four more times this year. Expectations for a hike are now weighted higher toward the later part of this year, according to the CME Group’s (CME) FedWatch tool. Williams expressed optimism about the economy, saying he expects it to power through weakness abroad and low oil prices. His bullish outlook came after bearish comments earlier this week from New York Fed President William Dudley, who’s concerned about falling expectations for inflation, according to media that covered his remarks.

Costco Earnings: Investors typically comb Costco Wholesale Corporation COST second-quarter results to see how the company did during the U.S. holiday season. The retailer reported late Wednesday, and results came in below expectations on both the top and bottom lines. Earnings per share were $1.24 compared with the Street consensus of $1.28, and revenue came in at $28.17 billion, compared with the consensus of $28.42 billion. Same-store sales rose, but at a slower rate than a year earlier. A stronger dollar that hurt sales outside the U.S. and signs of higher-income shoppers curtailing spending both weighed on results, Bloomberg Business reported.