STORY: Data showed weekly jobless claims fell more than expected to a two-month low last week and layoffs dropped in August, giving the Federal Reserve a cushion to continue raising rates to slow the labor market. Investors now await the monthly nonfarm payrolls report on Friday for more evidence on the labor market.

Economists polled by Reuters see a jobs increase of 300,000, while Wells Fargo revised its forecast for nonfarm payrolls to 375,000 from 325,000 and Morgan Stanley expects August payrolls of 350,000.