Here's how stocks could react to the looming April jobs report

• Markets are bracing for a key labor-market update on Friday.
• Options data implies a move of as much as 1.3% in the S&P 500 following the April jobs report.
• Strong hiring has both positive and negative implications for the stock market.

The April jobs report could jolt the stock market on Friday.

Wall Street is eyeing the potential for a big swing in the S&P 500 in the wake of the latest job market update, which will shed light on how well the economy is holding up and have implications for rate cuts later in the year.

Markets expect nonfarm payroll data to show the US added 60,000 jobs last month, down from 178,000 jobs added in March. The unemployment rate, which has crept higher but remained near a historic low in the past year, is expected to hold steady at 4.3%.

Options data shows that investors see as much as a 1.3% swing in stocks on Friday, according to strategists on JPMorgan's Market Intelligence team.

If the data shows the economy added more than 125,000 jobs for the month, the bank said it was expecting the S&P 500 to gain or shed 1%, indicating how a strong job market is both a win and a loss for investors. On the one hand, it signals that the labor market is still holding up, despite ongoing uncertainty stemming from the war in Iran.

On the other hand, it signals that the Fed may not have room to cut interest rates as much as investors are hoping, especially given ongoing concerns about inflation.

If the economy were to add fewer than 5,000 jobs for the month, the S&P 500 could decline 0.5% to 1%, the bank said, pointing to concerns that the economy is weakening.

Bank of America wrote on Thursday that it expects the economy to have added a "solid" 80,000 jobs in April while the unemployment rate held steady, which would make the job market "comfortably above breakeven."

"A 4.3% or lower u-rate would leave the Fed comfortably on hold in the near term amid rising inflation risks," analysts added.

The focus on the job market has intensified amid the Iran war. Investors are hoping that jobs growth will land in a sweet spot to allow more monetary easing without suggesting the US economy is on the path to a recession.

Job market data, though, has been mixed. Employers announced 83,387 layoffs in April, a 38% surge compared to the same month last year, according to the consultancy Challenger, Gray & Christmas.

Private payrolls grew by 109,000 in April, beating expectations, according to the ADP.

"The labor market has been showing some signs of stabilization, so Friday's report will be closely watched to see if last month's strong report was a one off or the start of a trend," Cooper Howard, the director of fixed income research and strategy at the Schwab Center for Financial Research, wrote in a note.