By Yashaswini Swamynathan
(Reuters) - U.S. stocks were little changed on Thursday as gains in bank stocks were countered by the second day of losses in energy shares, a day before the crucial monthly jobs report that could bolster already sky-high odds of a rate hike next week.
Fueling the rise in bank stocks was a report that showed the number of Americans applying for unemployment benefits rose to 243,000 last week, but remained below 300,000 for the 105th week.
Alongside an improving labor market is an uptick in inflation that has prompted a unusually hawkish rhetoric from several Fed officials in the past weeks, leading traders to price in a near 90 percent chance of a quarter point rate increase by March 15.
Friday's nonfarm payrolls data is expected to show 190,000 jobs were added in the U.S. private and public sectors in February.
"The market is setting up for the two-part symphony we are going to see over the next four trading days, the first is tomorrow's jobs number and then the Fed meeting, which is the real big event," said Joe Brusuelas, chief economist at RSM US LLP in New York.
The S&P 500 financial index (SPSY) rose 0.5 percent, led by gains in banks, which stand to benefit when loan rates go up.
However, a 2.5 percent decline in oil prices tempered the gains from a rise in bank stocks. The losses in oil added to the steep 5.4 percent fall on Wednesday.
The S&P 500 energy index (SPNY) was down 0.9 percent on Thursday, with Chevron (N:CVX) set for its fourth straight day of decline.
A frenetic post-election rally on bets of reduced regulation and tax cuts under President Donald Trump has been losing steam as investors fret over valuations and the possibility of Fed raising rates more aggressively.
"The fundamentals of the economy are sufficient to support where we are at now, but for further upside, we'll need to see progress on Trump's policies," said Brusuelas.
Meanwhile, the European Central Bank stood firm on its stimulus program but said there was no longer a sense of urgency in taking further action to counter deflation.
At 12:44 p.m. ET, the Dow Jones Industrial Average (DJI) was up 2.65 points, or 0.01 percent, at 20,858.38, the S&P 500 (SPX) was up 2.01 points, or 0.08 percent, at 2,364.99 and the Nasdaq Composite (IXIC) was up 5.26 points, or 0.09 percent, at 5,842.81.
Six of the 11 major S&P sectors were higher.
Johnson & Johnson (N:JNJ) was the top boost to the broader index and the Dow, up 1.2 percent after Jefferies raised its price target on the healthcare conglomerate's stock.
Apple (O:AAPL) was the top drag on the S&P and the Nasdaq, slipping 0.4 percent on chatter that iPhone 8 launch could be delayed.
Signet Jewelers (N:SIG) was the biggest percentage gainer on the S&P, with a near 8 percent rise after the company reported a quarterly profit above analysts' expectations.
Declining issues outnumbered advancers on the NYSE by 1,859 to 1,030. On the Nasdaq, 1,488 issues rose and 1,283 fell.
The S&P 500 index showed 21 new 52-week highs and 13 new lows, while the Nasdaq recorded 47 new highs and 43 new lows.
(This story has been refiled to correct lead to say "could bolster" from "would bolster".)