Wall Street set for a volatile day

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NEW YORK (CNNMoney.com) -- Stock futures fluctuated early Friday after a key report on the U.S. labor market showed a bigger-than-expected job loss in March.

Just after the report was released, futures fell sharply, briefly turning negative, then rebounded as investors mulled the new jobs data.

As of 9 a.m. ET, Nasdaq and S&P futures were moderately higher.

The report showed that 80,000 jobs were eliminated last month, the third straight month of job declines for the first time since the first half of 2003. Economists were expecting a loss of 50,000 jobs, according to a consensus estimate compiled by Briefing.com.

The unemployment rate rose to 5.1% from 4.8%, marking a three-year high. That reading was also higher than expected.

The weak jobs report could raise the chances of a bigger rate cut by the Federal Reserve at its April 29-30 meeting.

Investors trading fed funds futures on the Chicago Board of Trade are pricing in a 100% chance of another quarter-point rate cut at that meeting, but only an 18% chance of another half-point cut, according to late Thursday trading. The chance of the deeper cut retreated after a report from payroll processor ADP on Wednesday pointed to a narrow gain in private sector jobs in March.

Yellen: Economy 'all but stalled.' In a speech late Thursday, San Francisco Federal Reserve President Janet Yellen said that the U.S. economy has "all but stalled" and that it could shrink in the first half of the year.

Yellen is not a member of the Fed's rate-setting body, but she is considered an influential member of the central bank. Her remarks echoed testimony earlier this week from Federal Reserve Chairman Ben Bernanke, who said a recession is possible and that he expects unemployment to rise.

Stocks finished Thursday's session higher, but gains were mild as investors grew jittery ahead of the jobs report.

In major corporate news, a former president of Swiss banking giant UBS (UBS) urged the firm to split off the investment banking unit as a result of massive losses resulting from the subprime crisis. UBS shares jumped 3.5% in heavy Zurich trading.

Microsoft, Yahoo executives meet. Senior executives of Microsoft (MSFT, Fortune 500) and its acquisition target Yahoo (YHOO, Fortune 500) met this week to discuss Microsoft's bid for the Internet bellwether but failed to resolve any of their differences, according to a report Friday in the Wall Street Journal.

Motorola (MOT, Fortune 500) said late Thursday it was cutting 2,600 jobs. The company has laid off more than 10,000 employees since last year. Motorola shares fell 1.2% in after-hours trading despite the cost-cutting move.

Northwest Airlines (NWA, Fortune 500) announced it would trim its flight schedule this fall by 5% and freeze hiring of pilots as it tries to deal with rising jet fuel prices. It also announced a $10 to $20 rise in the fuel surcharge in place in international flights. Shares of the nation's No. 5 airline closed down 2% Thursday, although they gained momentum in the final minutes of trading following the late afternoon announcement. Shares gained 0.5% in after-hours trading.

GlaxoSmithKline (GSK) said late Thursday it has received approval from the Food and Drug Administration for its vaccine to prevent rotavirus in infants. That market currently is dominated by Merck (MRK, Fortune 500). Shares of Glaxo gained 1.3% in after-hours trading.

Oil prices rose in early electronic trading, taking the price of a barrel of light, sweet crude up 96 cents to $104.79. The price of a gallon of unleaded gas also hit yet another record high, according to the latest daily reading from AAA.

In global trade, Japan stocks posted modest losses. European markets rose in midday trading.