Bouncing Stocks Face Hurdle

The retail sector was strong despite an overall slower-than-expected start to the spring shopping season. Companies blamed the weather for weak same-store sales in February as Thomson Financial's index of same-store sales rose 2.6% vs. expectations for a 3% rise. And 61% of retailers missed estimates, reported Thomson.

Weak numbers came in from discount stores, while luxury stores fared better. Wal-Mart(WMT Quote) and Costco(COST Quote) fell 0.1% and 3.3%, respectively, while high-end stores Nordstrom(JWN Quote) and Coach(COH Quote) posted better-than-expected sales and saw their shares jump 4.5% and 2.2%, respectively. The S&P Retail Index rose 1.1%.

The subprime meltdown seems largely priced into the stock market at this point, as does some consumer weakness in the less affluent population.

But a serious drop in employment prospects is a bit off the radar of most traders. While most market participants now accept that the economy will grow at a below-trend pace in the next couple of quarters, the strong labor market has been held up as the safety net -- the factor that keeps the bottom from falling out.

Analysts believe Friday's payrolls report will show that 95,000 new jobs were added in February.

"The markets expect that if the jobs report surprises, it will do so on the downside," says John Lonski, chief economist at Moody's Investors Service.