NEW YORK (CNN/Money) - U.S. stock markets rallied Thursday, starting off the first trading day of the new quarter with tech-fueled gains. But those gains may evaporate Friday, when the March payrolls tally is released.

On Thursday, the Nasdaq composite (up 20.79 to 2015.01, Charts) added about 1 percent, the Standard & Poor's 500 (up 5.96 to 1132.17, Charts) index added about 0.5 percent and the Dow Jones industrial average (up 15.63 to 10373.33, Charts) added 0.15 percent.

Stocks rallied Monday and Tuesday but ended with small losses Wednesday. Wednesday also marked the last day of a tumultuous quarter. After starting with a rally and selling off at the end of the first quarter, the Dow lost about 0.9 percent, the Nasdaq lost 0.5 percent. However, the S&P 500 managed a gain, adding 1.3 percent in the first three months of the year.

But the second quarter started off on a positive note Thursday, with investors bidding up technology and other sectors. The gains were based partly on some bargain hunting after two listless sessions, and partly in response to the morning's stronger-than-forecast ISM manufacturing sector survey and the enthusiasm surrounding the reshuffling of the Dow industrials' components, said Bryan Piskorowski, a market analyst at Wachovia Securities.

Anticipation about Friday's monthly payrolls tally played a role in the market action as well.

Due shortly before the open Friday, the March unemployment rate is expected to hold steady at 5.6 percent, according to economists surveyed by Briefing.com. But employers are expected to have added 123,000 jobs to payrolls, according to the forecasts, after adding a surprisingly low 21,000 last month.

Although the major indexes had been drifting since January, many market watchers credit the surprisingly low February jobs number with the stock market's more pronounced pullback in March. However, after rallying through 2003 and early 2004, many analysts had been calling for a correction regardless of developments in the labor market.

Some economists are forecasting that as many as 200,000 or more jobs were added in March, with the number depending on how the warmer weather impacted construction work and how many California grocery workers on strike had returned to work.

After the selloff that followed the weak February number, a strong number would seem to be a positive for the market. But there is also the risk that a very strong uptick would trigger stock market selling on worries that the Fed will raise historically low interest rates -- good for stocks -- sooner rather than later.

"The market can find something good and something bad in every economic number," said Timothy Ghriskey, chief investment officer at Solaris Asset Management. "If the number is strong, that's a positive, but if its really strong, people may worry about interest rates."

However, Piskorowski thinks investors "would welcome a very strong number, rather than focus on interest rate fears, since we've been disappointed about payrolls for the last two months."

The session's biggest corporate news surrounded the reshuffling of the Dow industrials, which will take effect April 8. Three stocks will be removed from the Dow 30 -- AT&T (T: down $0.27 to $19.30, Research, Estimates), Eastman Kodak (EK: down $1.07 to $25.10, Research, Estimates) and International Paper (IP: down $0.08 to $42.18, Research, Estimates). The three new additions will be American International Group (AIG: up $1.97 to $73.32, Research, Estimates), Pfizer (PFE: up $0.54 to $35.59, Research, Estimates) and Verizon Communications (VZ: up $0.36 to $36.90, Research, Estimates). The Dow was last reshuffled November 1, 1999.

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Unsurprisingly, the three future ex-Dow components declined, although their losses eased as the session wore on. Eastman Kodak was the weakest of the three, losing 4 percent. The three future members of the 30 industrials climbed between 1 percent and 3 percent each.

Among other movers, Wal-Mart Stores (WMT: down $1.34 to $58.35, Research, Estimates) fell 2.2 percent after Merrill Lynch downgraded the Dow stock to "neutral" from "buy" within a broader note on the retail sector, on concerns that sales growth will diminish in the second half of 2004.

Shares of Ericsson (ERICY: up $2.11 to $29.87, Research, Estimates) rallied 7.6 percent after the Swedish telecom equipment maker said that profit margins in the first quarter would be higher than in the fourth quarter.

Investors also took comfort in the day's mostly upbeat economic news.

The Institute for Supply Management's manufacturing index for March rose to 62.5 in March from 61.4 the previous month. The index had been expected to decline to 59.5.

Released earlier in the session, the weekly jobless claims report showed that 342,000 people filed new claims for unemployment last week, down from an upwardly revised 345,00 the previous week, slightly above the expectations of economists surveyed by Briefing.com. The long-delayed February producer prices report was also released, showing that prices rose modestly in February by less than what economists were expecting.

Market breadth was positive. On the New York Stock Exchange, where 1.52 billion shares traded, advancers led decliners by nearly two to one. On the Nasdaq, gainers outnumbered losers by more than three to two as 1.79 billion shares changed hands.

Treasury prices fell, with the 10-year note losing 12/32 of a point in price, pushing its yield up to 3.87 percent from 3.83 percent late Wednesday. The dollar declined versus both the yen and euro.

Among commodities markets, NYMEX light sweet crude oil futures tumbled $1.49 to settle at $34.27 a barrel. COMEX gold gained 50 cents to settle at $428.80 an ounce.