By Yashaswini Swamynathan
(Reuters) - U.S. stock index futures added to their gains on Thursday after data showed U.S. jobless claims posted the biggest drop in almost two years last week, further pointing to the strength of the labor market and the overall economy.
A Labor Department report showed 234,000 Americans applied for jobless claims last week, far less than 258,000 in the week before and economists' estimates of 250,000.
Dow e-minis (1YMc1) were up 20 points, or 0.1 percent, with 35,745 contracts changing hands. S&P 500 e-minis (ESc1) were up 2.25 points, or 0.1 percent, with 210,276 contracts traded.
Nasdaq 100 e-minis (NQc1) were up 6.25 points, or 0.12 percent, on volume of 41,600 contracts.
The jobless claims report comes ahead of Friday's nonfarm payrolls data and a day after a strong private-sector jobs report, that sparked a rally in the markets on Wednesday.
But, the rally was short-lived and U.S. stocks sharply reversed course after the Federal Reserve signaled it could change its bond investment policy this year and trim its balance sheet as long as economic data held up.
The minutes of the Fed's latest meeting also showed officials "viewed equity prices as quite high relative to standard valuation measures," adding to jitters over lofty valuations as the first-quarter earnings season approaches.
Earnings of S&P 500 companies are expected to have risen 10.1 percent. The index is trading at about 18 times forward earnings estimates, above its long-term average of 15.
Investors are also cautious ahead of the meeting, starting Thursday, between President Donald Trump and his Chinese counterpart, Xi Jinping. On top of the agenda is the possibility of Trump using trade to pressure China to do more to rein in North Korea's arms program.
"The Trump Xi meeting is in focus and we don't expect any material changes, other than tough talk and a good talking point for tomorrow's newspaper headlines," Peter Cardillo, chief market economist at First Standard Financial wrote in a note.
The meeting comes as some investors question Trump's ability to deliver on his pro-growth promises, such as tax cuts, following recent setbacks in pushing reforms through Congress.
In stocks, Advanced Micro Devices (O:AMD) dropped 4.5 percent to $13.53 premarket after Goldman Sachs (NYSE:GS) initiated coverage with a "sell" rating.
Among retailers, Costco (O:COST) gained 1.9 percent to $170.14 after reporting March sales, while Bed Bath & Beyond (O:BBBY) rose 2.7 percent to $39.07 after reporting quarterly results.
Constellation Brands (N:STZ) jumped 5 percent to $169.48 after the Corona beer maker's better-than-expected quarterly results and upbeat full-year forecast.