The official May US jobs report tomorrow is the key focus for Wall Street as the guessing game about the timing of a potential downward adjustment to the Federal Reserve's quantitative easing program remains centre stage.
With the next two-day Federal Open Market Committee meeting starting on June 18, tomorrow's government payrolls data is expected to provide direction to the FOMC's attitude toward tapering its US$85 billion a month bond-buying program.
Employers probably added 170,000 jobs to their payrolls in May, according to a Reuters survey of economists, while the median forecast in a Bloomberg survey calls for an increase of 165,000 jobs. The unemployment rate is expected to stay at 7.5 per cent.
A Labor Department report today showed that initial claims for state unemployment benefits declined 11,000 to a seasonally adjusted 346,000 in the week ended June 1. A report yesterday showed private employers added 135,000 jobs in May.
"The US labour market is still improving steadily, just not at a strong enough pace to warrant Fed tapering yet," Jennifer Lee, a senior economist at BMO Capital Markets in Toronto, told Reuters.
In late afternoon trading in New York, the Dow Jones Industrial Average rose 0.13 per cent, the Standard & Poor's 500 Index advanced 0.20 per cent and the Nasdaq Composite eked out a 0.07 per cent gain.
Earlier in the session, the S&P 500 had fallen as much as 0.7 per cent.
"We've had a series of data points collecting over the last month or two that shows some moderation in the economy," Kevin Caron, market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey, told Reuters. "The employment data is a big number and it will add another piece of evidence that the economy is once again slowing down as we head into mid-year."
Europe's benchmark Stoxx 600 Index ended the session with a 1.2 per cent drop from the previous close. France's CAC 40 weakened 1 per cent, Germany's DAX fell 1.2 per cent, while the UK's FTSE 100 dropped 1.3 per cent.
European Central Bank policy makers kept their key rate at a record low, and downgraded their forecast for growth for this year, while upgrading expectations for 2014. Annual real GDP is expected to decline by 0.6 per cent in 2013, followed by growth of 1.1 per cent in 2014.
"Looking ahead to later in the year and to 2014, euro area export growth should benefit from a recovery in global demand, while domestic demand should be supported by the accommodative stance of our monetary policy and by the recent real income gains due to lower oil prices and generally lower inflation," ECB President Mario Draghi said after the meeting.