(Bloomberg) — Stocks fell in the run-up to Friday’s jobs report as a rally in oil amid geopolitical tensions triggered a flight to the safest corners of the market. Treasuries climbed and the dollar erased losses.

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The S&P 500 dropped 1%, wiping out earlier gains as Brent crude topped $90 a barrel after Israeli Prime Minister Benjamin Netanyahu said his country will operate against Iran and its proxies and will hurt those who seek to harm it. Bond yields fell across the US curve — even after Federal Reserve Bank Minneapolis President Neel Kashkari said rate cuts may not be needed this year if progress on inflation stalls.

Healthy US employment gains likely continued in March while wage growth moderated, according to a Bloomberg survey of economists. Payrolls are seen increasing by at least 200,000 for a fourth straight month. Average hourly earnings are projected to climb 4.1% from the same month last year, the smallest annual advance since mid-2021.

“As always, the monthly jobs report will have the final say,” said Chris Larkin at E*Trade from Morgan Stanley. “Investors will be looking for a ‘Goldilocks’ number that won’t give the Fed any reason to delay rate cuts, but also doesn’t suggest the labor market is taking a serious downturn.”

A survey conducted by 22V Research shows there’s no clear consensus on the market reaction to Friday’s jobs report. Among the investors surveyed, 29% think the response will be “risk-on,” 32% said “risk-off,” and 39% are betting on a “mixed/negligible” reaction.

“Average hourly earnings has supplanted payrolls as the most important labor indicator,” said Dennis DeBusschere at 22V. “That’s consistent with inflation being investors biggest concern, but investors are also watching labor data the closest.”

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Bond investors are strongly inclined to buy Treasuries on any selloff resulting from the March employment data, according to a survey conducted by Vail Hartman and Ian Lyngen at BMO Capital Markets.

They found that 57% of respondents would buy if Treasuries fall after the release. If bonds rally following the report, around two-thirds of investors said they’d do nothing.

Countdown to Jobs Report:

The market will be sensitive to any data point that hints at greater inflation in the pipeline. Job creation that is in-line or even slightly below estimates would provide some comfort, as would a softer reading on hourly wages.

A single month of data isn’t that important in the grand scheme of things, but current market psychology is starting to tilt away from the notion that the downward trajectory of inflation is intact, so data that reigned the narrative back in place would support the markets.

We look for payrolls to have lost further momentum in March, with the series printing just below the 200,000 mark.

A below-consensus print could lead to a ‘bull steepening’ in rates — as market pricing for rate cuts rebounds. Fedspeak has signaled an emphasis on inflation data over growth data, but Chair Jerome Powell noted the “two-sided risks” of their policy. We expect to see a larger market repricing on a weaker print than a stronger reading.

While the market is likely to react to even modest deviations from consensus, our sense is that it will take a large upside or downside surprise to sustainably change futures market expectations for three 25 basis-point cuts in the fed funds rate this year.

Weighing the data and our internal models, the leading indicators point to a slightly above expectation reading in this month’s nonfarm payrolls report, with headline job growth potentially coming in somewhere in the 200,000-250,000 range, albeit with a big band of uncertainty given the current global backdrop.

March’s employment situation report is broadly expected to reinforce the ongoing resilience of the labor market, which has continued to afford the Fed sufficient flexibility to push its higher-for-longer agenda.

Traders are also keeping an eye on more than a half-dozen central bank officials speaking Thursday.

Fed Bank of Richmond President Thomas Barkin said it’s “smart” to take time to gain greater clarity about the inflation trajectory before lowering rates. His Philadelphia counterpart Patrick Harker said inflation remains too high, even as the economy has been resilient and job growth remains strong.

Chair Jerome Powell signaled this week that policymakers will wait for clearer signs of lower inflation before cutting interest rates, even though a recent bump in prices didn’t alter their broader trajectory.

“Powell set the tone. He wants to ease, the question is when will he have enough cover to justify that ease and move forward without multiple dissents?” said Andrew Brenner at NatAlliance Securities. “June still looks like the odds favorite, but barely.”

Corporate Highlights:

• The US Federal Trade Commission warned hundreds of companies including Pfizer Inc., Baxter International Inc. and Thermo Fisher Scientific Inc. that it could challenge their acquisitions even after the deadline for the agency’s antitrust review had passed.

• Alphabet Inc. is talking with financial advisers about potentially making an offer for HubSpot Inc., an online marketing software company valued at about $34 billion, Reuters reported on Thursday.

• Ford Motor Co. is delaying the roll out of an electric three-row sport utility vehicle by two years, extending the layoff of 2,700 workers in Canada who were set to begin building it in 2025.

• Boeing Co.’s latest 737 Max crisis has worsened an airline shortage of popular narrowbody aircraft, sending the cost of used-jet rentals to the highest level in years.

• Levi Strauss & Co. reported higher-than-expected sales and profit in the first quarter that helped fuel a more optimistic full-year outlook.

• Amylyx Pharmaceuticals Inc. will pull its drug for a progressive, fatal nerve disease from the market after a trial showed that patients taking it fared no better than those getting a placebo on a variety of measures.

• Block Inc. was cut to underweight at Morgan Stanley, which said the downgrade reflects limited additional opportunity for the company’s Cash App to expand banking and credit services.

Key events this week:

• Eurozone retail sales, Friday

• US unemployment, nonfarm payrolls, Friday

• Fed’s Michelle Bowman, Thomas Barkin and Lorie Logan speak, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 1% as of 3:33 p.m. New York time

• The Nasdaq 100 fell 1.2%

• The Dow Jones Industrial Average fell 1.2%

• The MSCI World index fell 0.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0839

• The British pound was little changed at $1.2641

• The Japanese yen rose 0.3% to 151.23 per dollar

Cryptocurrencies

• Bitcoin rose 5% to $69,005.38

• Ether rose 2.3% to $3,381.86

Bonds

• The yield on 10-year Treasuries declined four basis points to 4.31%

• Germany’s 10-year yield declined three basis points to 2.36%

• Britain’s 10-year yield declined four basis points to 4.02%

Commodities

• West Texas Intermediate crude rose 1.4% to $86.63 a barrel

• Spot gold fell 0.3% to $2,293.88 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Vince Golle, Craig Stirling, Liz Capo McCormick, Edward Bolingbroke and Carter Johnson.

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