Employment report key for investors

NEW YORK – Wall Street finished a quiet session modestly higher Thursday as investors awaited the government’s September employment report, hoping it will strike a balance between steady growth and more room for interest rate cuts.

Thursday’s economic data, which showed a gain in jobless claims and a drop in factory orders, gave investors little incentive to make any big moves ahead of today’s payrolls report.

Wall Street appears optimistic that the Labor Department report will indicate a rebound from August and include revisions to that month’s dismal numbers. August’s job creation report showed a decline in payrolls when economists had predicted a rise, and sent the Dow Jones industrial average down nearly 250 points the day it was released. Since then, the Federal Reserve has lowered a key interest rate and the Dow quickly bounced back to where it was in mid-July, before the credit markets tightened up and caused stocks to fall sharply.

Today’s report is important because this year’s relatively stable job market has been an important prop for the U.S. economy, helping to offset the housing slump and sluggish growth.

“The jobs report can be a real distraction for the market, and with good reason. The number of people working, where they work, how much they get paid, tells us a whole lot about the economy,” said Alan Gayle, senior investment strategist at Trusco Capital Management. “In the meantime, the markets are pretty much treading water. A strong report (Friday) will revive notions that the Fed is one and done. If the report continues to be soft, that’s going to suggest more easing coming our way.”

But while investors are angling for the Fed to lower rates again when it meets Oct. 30-31 – which would spur spending by making borrowing cheaper – they don’t want the job market to weaken. When people don’t have incomes, they tend to trim spending and can become delinquent in their bill payments.

“A relatively strong employment report will be good news for stocks in that it will help support profit growth,” Gayle said. “Obviously Fed rate cuts are good, but more earnings is always the best.”

The Dow rose 6.26, or 0.04 percent, to 13,974.31, after shooting to a record high Monday and then giving back a large chunk of its gains Tuesday and Wednesday.