(For a Reuters live blog on U.S., UK and European stock markets, click or type LIVE/ in a news window.)
* U.S. manufacturing sector steady in August - ISM
* All eyes on August nonfarm payrolls report on Friday
* Nvidia, AMD fall after U.S. export ban on AI chips to China (Updates to market close)
By Chuck Mikolajczak
NEW YORK, Sept 1 (Reuters) - The S&P 500 managed to eke out a slight gain on Thursday to snap a four-session losing skid thanks to a late rally as investors eyed a key report on the labor market on Friday.
Data showed weekly jobless claims fell more than expected to a two-month low last week and layoffs dropped in August, giving the Fed a cushion to continue raising rates to slow the labor market. Investors now await the monthly nonfarm payrolls report on Friday for more evidence on the labor market.
Economists polled by Reuters see a jobs increase of 300,000, while Wells Fargo economist Jay Bryson revised his forecast for nonfarm payrolls to 375,000 from 325,000 and Morgan Stanley economist Ellen Zentner expects August payrolls of 350,000.
"The setup into tomorrow is definitely bad news is good news and good news is bad news," said Keith Buchanan, senior portfolio manager at Globalt Investments in Atlanta.
"The last few days of equity trading has been pretty dreadful in that the market seems to pricing in the pushing of a (Fed) pivot out of consensus."
According to preliminary data, the S&P 500 gained 12.23 points, or 0.31%, to end at 3,967.23 points, while the Nasdaq Composite lost 30.56 points, or 0.26%, to 11,785.64. The Dow Jones Industrial Average rose 145.92 points, or 0.46%, to 31,656.35.
Still, the S&P managed to bounce in the latter stages of trading after hitting a low of 3,903.65, near what some analysts see as a strong support level for stocks.
The benchmark S&P index has stumbled about 6% during the five-session decline, its longest losing streak in about six weeks, which began after Fed Chair Jerome Powell signaled on Friday the central bank will remain aggressive raising rates to fight inflation even after consecutive hikes of 75 basis points, a message echoed by other Fed officials in recent days.
Weighing on the tech sector were chipmakers as the Philadelphia semiconductor index dropped, led by a tumble in shares of Nvidia as the biggest weight on the S&P 500 and a fall in Advanced Micro Devices after the United States imposed an export ban on some top AI chips to China.
Other economic data showed a further easing in price pressures, while manufacturing grew steadily in August, thanks to a rebound in employment and new orders.
Traders expect a 73.1% chance of a third straight 75 basis points increase in rates in September and expect it to peak around 3.993% in March 2023.
Investors are concerned the Fed could potentially make a policy mistake and raise rates too high, tilting the economy into a recession, even if inflation shows signs of abating.
Reflecting the defensive tone, healthcare and utilities were the leading sectors to the upside.
Investors have also become more concerned about corporate earnings in a rising rate environment that has also stoked a rally in the U.S. dollar. Hormel Foods Corp fell after the packaged foods maker cut its full-year profit forecast.
(Reporting by Chuck Mikolajczak; editing by Jonathan Oatis)