US stocks extended their lackluster performance on Thursday, as markets struggled to recover from a challenging start to the year. The Federal Reserve's decision to leave hopes for an early interest rate cut hanging further dampened investor confidence. The Dow Jones Industrial Average closed marginally above the flatline, while the S&P 500 fell by about 0.3%. The Nasdaq Composite, after briefly pushing for gains, closed nearly 0.6% below the flatline.

Investors had hoped for clarity regarding a potential rate cut in the Fed minutes released on Wednesday. While there was agreement among officials that rates had peaked and should be lower by the end of 2024, some indicated that they might remain at historically high levels depending on future inflation trends.

Despite uncertainties in monetary policy, several data points released on Thursday provided some optimism. The latest ADP employment report revealed that private companies added 164,000 jobs in December, beating November's reading of 103,000 and surpassing analysts' expectations of 115,000 additions. Additionally, the Department of Labor reported that jobless claims for the previous week stood at 202,000, below the estimated 216,000.

Meanwhile, travel stocks received a boost as oil prices fell. Lower fuel costs projected a decrease in operating expenses for cruise line and airline operators, leading to an increase in stock value. American Airlines, Delta, United, Royal Caribbean, and Carnival all experienced positive gains.

However, energy-related stocks faced pressure, resulting in the worst performance for the S&P 500 Energy Select ETF, which was down more than 1%.

The December jobs report from the Bureau of Labor Statistics is highly anticipated by investors. The report, scheduled for release on Friday morning, is expected to show a cooling labor market for the end of 2023. Analysts predict that nonfarm payrolls rose by 175,000 in December, with the unemployment rate expected to tick up to 3.8% from the previous month's rate of 3.7%.

The stock market's recent performance and the labor market report will play a significant role in defining the direction of the market. Investors have attributed the recent rally, which brought stocks close to all-time highs, to changing sentiment and the belief that the Federal Reserve can achieve a soft landing, where inflation retreats to 2% without a major downturn in economic growth.

In other news, mortgage rates have seen a small increase after weeks of decline. Rates for 30-year loans inched up to 6.62% from 6.61% the previous week. The slight rise may impact homebuyers' ability to afford homes, especially if lower rates stimulate demand and exacerbate the existing supply shortage.

Looking ahead, earnings season will play a crucial role in driving the stock market rally. Analysts project a growth of 11.7% in S&P 500 companies' earnings for the full year, which is above the 10-year average annual growth rate of 8.4%. Bank of America anticipates a close to 10% growth in the S&P 500 from current levels, with a focus on positive earnings reports to sustain the bullish sentiment.

As the market teetered on Thursday, investors remained cautious as they awaited more clarity on monetary policy and eagerly anticipated the December jobs report.