Jobs Report Preview: Investors Bracing for Downside Surprise

Selling pressure remains today as investors ride out the shortened market week and punt on the economy until after the March Jobs report.

Tomorrow's release of the jobs report comes at 8:30am eastern time, while the U.S. stock market is closed for Good Friday. Consensus estimates predict the unemployment rate holds steady at 8.3% and nonfarm payrolls rise 203,000.

"Given the fact that we've seen a sell-off the last couple of days, investors are going into the weekend holding their breath in anticipation of a number that comes in a little lighter than that (consensus)," says Mark Luschini, chief investment strategist at Janney Montgomery Scott.

Luschini points to this week's other jobs data for insight on the monthly report. Earlier today, weekly jobless claims showed a modest decline of 6,000 to 357,000 and pushed the 4-week average down to 361,750 — the lowest level since April 2008. Also, ADP data released on Wednesday showed the private sector added a stable 209,000 jobs in March, and an upwardly revised 230,000 in February.

If the March jobs report does disappoint, Luschini says "it may play into recent concerns of slowing economic data, particularly as risks have elevated in Europe. And that could impair equity markets Monday morning."

As Breakout co-host Matt Nesto points out, the month of March came in like a lamb, and calls it a "seasonally blessed month in terms of weather and economic activity." This should ultimately boost job creation for the time being.

"The question mark here is —and we won't know this for several more months - is to what degree that really unusual stretch of warm weather we've had, particularly in the North East, has actually pulled forward some hiring," says Luschini. "As a consequence we could see a tapering of those jobs numbers; not necessarily to be well-below 200,000, but to the extent we've been teased by a run-rate over the last three months of over 245,000 on a monthly basis."

Another month of above 200,000 jobs created would be the fourth consecutive month of gains topping that key number. This would also mark the longest stretch of +200K monthly gains since 1999.

Bottom line: "Something less than (200K) could underwhelm equity investors," Luschini states.

So, there you have it. A very key level to watch in tomorrow morning's highly anticipated jobs data. The ramifications will play out in Monday morning trading. Also worth noting, the bond market will be open for a half-day tomorrow, so we could see some early hedging activity if we do get hit with a downside surprise.