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Market Awaits Jobs Report

Major U.S. stock indexes ended with modest gains Thursday as traders waited for Friday's March employment report, which is expected to mirror data released earlier this week showing erosion in the labor market. Sentiment is building that a recession may be at hand.

Thursday brought more signs that the Federal Reserve's sharp rate-tightening clip over the past year is taking an increasing toll on the labor force, as outplacement firm Challenger, Gray & Christmas reported 89,703 layoffs at U.S. companies in March. That figure is up 15% from February and quadruples the number from a year ago. Weekly U.S. jobless claims also rose more than expected.

U.S. equity markets will be closed for the Good Friday holiday, but the Labor Department will still release its monthly Employment Report, which is expected to show nonfarm payrolls rose by about 240,000 in March, less than half the pace in January. Monthly payroll growth has often topped expectations over the past year, so traders will be watching closely for any possible turn in that pattern, says Collin Martin, director of fixed income strategy at the Schwab Center for Financial Research.

"All eyes are on the payroll numbers tomorrow," Collin says. "More cracks are showing in the labor market, though nonfarm payrolls have been an exception over recent months. How strong or weak the numbers are will be one key to market direction next week." Here's how the major indexes performed Thursday:

•The S&P 500® Index rose 14.64 points (0.4%) to 4105.02; the Dow Jones industrial average was little changed at 33,485.29; the Nasdaq Composite rose 91.09 (0.8%) to 12,087.96. •The 10-year Treasury yield rose about 2 basis points to 3.305%. •Cboe's Volatility Index was down 0.68 at 18.40.

After jumping 7% in the first quarter, the S&P 500 Index started out the second quarter posting a slight drop for the week. Tech stocks were generally firm, and communication services led gainers among S&P 500 sectors, while energy stocks led to declines.

WTI crude futures were little changed but remained above $80 a barrel and near two-month highs. Gold futures extended Wednesday's declines from 13-month highs.

Large scale layoffs continue

The Challenger, Gray & Christmas layoffs report followed a weaker-than-expected payroll figure released Wednesday by ADP, Inc., and soft manufacturing data out early this week. Also Thursday, the Labor Department said initial weekly jobless claims totaled 228,000 and upwardly revised the prior week's claims to 246,000. Analysts had expected 203,000 new claims last week, according to

The tech sector has led all industries in terms of recent layoffs, accounting for about 38% of cuts, according to Challenger, Gray & Christmas. While the economy is still creating jobs, "with rate hikes continuing and companies reining in costs, the large-scale layoffs we are seeing will likely continue," Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas, said in a statement.

Recent labor market weakness has stoked conviction that the Fed may pull back on its tightening pace after boosting its benchmark funds rate nine times over the past year. Late Thursday, the CME FedWatch tool reflected roughly 50-50 odds that the central bank will keep rates unchanged at its May policy meeting and 46% odds that it will drop its funds rate at least 25 basis points by July.

Still, despite some expectations for the Fed to lower interest rates as soon as this summer, any such move is unlikely sooner than that, says Liz Ann Sonders, chief investment strategist at Schwab. "It's certainly possible the Fed will make a fairly quick pivot to rate cuts in the future, but only if the banking situation turns into a true crisis and/or the labor market or economy worsens significantly from here," she says.

Among individual stocks, shares of Walmart (WMT) rose modestly after the country's largest retailer reiterated previous guidance at its investor meeting Wednesday. One Walmart executive recently hinted that consumers are focused on saving money, noting a higher demand for private label products (sometimes called "generics") over name brands.

In another retail development, Costco (COST) shares fell more than 2% after the company reported a 0.9% gain in March comparable sales—the lowest since April 2020, according to Bloomberg, and the second month of deceleration.

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