Coming off a barrage of flimsy company earnings reports that included Apple's first revenue drop in 13 years, investors will turn to April jobs data for signs of budding resilience or further weakening in the second quarter.
US nonfarm payrolls, unemployment and wages data are due Friday May 6, when the economy is expected to have added 200,000 jobs in April, with the unemployment rate unchanged at 5 percent and a wage increase of 0.3 percent, according to Reuters data.
Unlike in recent months, where weak jobs numbers were counted on to stave off another Federal Reserve interest rate hike, investors are now itching for better-than-expected employment data to indicate a stronger next earnings season, analysts said.
"The most important thing to stock investors is not what the Federal Reserve will do in June at their meeting; the most important thing is to see a recovery in the economy and earnings," said Hugh Johnson, chief investment officer of Albany, New York-based Hugh Johnson Advisors.
Even as expectations for first-quarter earnings have improved of late, S&P 500 companies are still seen posting a 5.9 percent earnings fall in the first quarter. On April 1, the estimate was for a 7.1 percent decline.
With dismal US gross domestic product figures released on Wednesday showing the slowest economic expansion in two years, jobs will be especially important for signalling a second-quarter recovery, Johnson said.
If employment can beat estimates, markets will likely rally, Johnson said, even if the number triggers talk of an impending rate hike at the Fed.
After a slow climb since the start of the month, as many companies beat ultra-low first-quarter earnings expectations, stocks fell sharply over the last two trading days. Pushing the downturn were Apple's results, which included the first decline in iPhone sales.
Even if a stronger-than-expected jobs report furthers a short-term selloff, investors would then feel more confident that a bull market is sustainable without Fed support, said Mark Luschini, chief investment strategist at Janney Capital Management.
"If we're going to see positive economic growth perpetuate, it needs to come on the back of job growth and wage increases," Luschini said. "If we did see some disruption as a consequence of the Fed raising interest rates, it would be welcome."
Stronger employment data signals an increase in demand for consumer goods, which typically indicates better revenue for companies.
"The jobs report is a great running barometer on how our economy is doing," said Jack Ablin, chief investment officer at BMO Private Bank.
Ablin said he would pay close attention next week to any changes in wage growth, which has been particularly stagnant.
Average hourly earnings gained seven cents in March after slipping the prior month. Nonfarm payrolls rose 215,000 in March and the unemployment rate edged up to 5.0 percent from an eight-year low of 4.9 percent.
In addition to employment figures, analysts said they will continue to look at earnings reports next week, Fed officials' comments, and economic data, including manufacturing, services sector growth and car sales.