After a losing August, Dow ekes out a gain

After seeing its six-month winning streak snapped in August, the Dow kicked off September -- historically a tough month for blue-chip stocks -- with a small gain as Wall Street awaits a key jobs report Friday that could determine the Federal Reserve's next move on interest rates.

The Dow Jones industrial average nosed higher a little before the 4 p.m. ET close to finish up 0.1%.The Nasdaq composite gained 0.3% while the S&P 500 ended virtually flat, off by a tiny fraction.

Stocks took a turn for the worse after a closely-watched index of manufacturing activity showed the sector contracted in August for the first time since February. The ISM manufacturing index fell 49.4 from 52.6 in July, the Institute for Supply Management said Thursday. 

Factory activity shrinks for 1st time since Feb.

August was a quiet month for the U.S. stock market, with volatility at very low levels.  The S&P 500 did not see a day with a change of 1% in either direction the entire month.

Wall Street now girds for September, which has been the worst-performing month for the Dow in the past 50 and 100 years, according to Bespoke Investment Group.

Investors are girding for the August jobs report, set for release at 8:30 a.m. ET, which is being closely watched as a third straight month of strong gains in the employment market could boost odds of the first interest hike of the year by the Fed when it meets Sept. 20-21.

Strong jobs report Friday could break market calm

On Wednesday, payroll processor ADP reported that private employers created 177,000 new jobs last month, topping forecasts by 2,000. That solid number could suggest a strong government employment report tomorrow.

In the latest data on the job market, the number of Americans filing for first-time jobless benefits fell by 2,000 to 263,000 in the latest weekly reading released earlier Thursday.

With odds of a Fed rate hike on the rise, the yield on the 10-year Treasury note briefly climbed back above 1.6% in early trading for the first time since Aug. 26, which was the only day in August in which the long-term government bond yield closed above 1.6%. The yield moved back lower in later trading to 1.57%.

On the positive side, manufacturing data in China and the U.K. both topped expectations in Europe, relieving some of the angst about the health of the global economy. Overall manufacturing data in the eurozone, however, fell shy of expectations. The better-than-expected data out of the U.K. was viewed as a relief to investors following the Brexit vote in late June.

Stocks in Europe were mostly higher, with the broad Stoxx Europe 600 index up 0.04%. Stocks were weaker in Asia, with Japan's Nikkei 225 up 0.2%, but shares closing lower in Hong Kong and mainland China.