Stocks edged lower on Thursday on caution ahead of Friday's all-important jobs report, but the S&P 500 still posted its best monthly gain since October 2011.
The benchmark S&P 500 advanced 5.1 percent in January as investors cheered a compromise that temporarily postponed the impact of the "fiscal cliff" and fourth-quarter earnings were better than expected.
The S&P 500 registered its largest monthly advance since a rise of more than 6 percent in October 2011 and the best January showing since a 6.1 percent jump in 1997. For the month, the Dow gained 5.8 percent and the Nasdaq rose 4.1 percent.
Investors expect a pullback in equities after the recent gains, though they have bought on dips over the past four weeks. The largest daily decline on the S&P 500 so far in 2013 was Wednesday's 0.39 percent drop after data showed the economy contracted in the fourth quarter of 2012.
On Friday, the government is due to release January's employment figures at 8:30 a.m. (1330 GMT). Economists polled by Reuters expect non-farm payrolls to show employers added 160,000 jobs compared with a rise of 155,000 in December. The unemployment rate is likely to hold steady at 7.8 percent.
A survey by payroll processing company ADP on Wednesday showed private sector employment rose higher than expected last month, but the government's measure of jobless benefits claims increased last week.
"It's the calm before the potential storm. The uncertainty about tomorrow's numbers comes from that fact that we had a decent ADP report but the weekly claims were not so great," said Randy Frederick, managing director of active trading and derivatives for Charles Schwab in Austin, Texas.
In a separate report, the Commerce Department said American incomes rose 2.6 percent last month, the biggest increase since December 2004.
"We could see an overly sensitive market to a bad number tomorrow, given that we've been up without a major correction, and that makes the market sensitive to the downside."
Friday will also bring reports on consumer confidence, U.S. manufacturing, construction spending and car sales.
Limiting losses on the Nasdaq composite index, Qualcomm gained 3.9 percent to $66.02 after the world's leading supplier of chips for cellphones beat analysts' expectations for quarterly profit and revenue and raised its targets for the year.
Facebook shares fell 0.8 percent to $30.98 after falling as low as $28.74 a day after the social network company said it doubled its mobile advertising revenue in the fourth quarter. However, growth trailed some of Wall Street's most aggressive estimates.
The Dow Jones industrial average <.DJI> was down 49.84 points, or 0.36 percent, at 13,860.58. The Standard & Poor's 500 Index <.SPX> was down 3.85 points, or 0.26 percent, at 1,498.11. The Nasdaq Composite Index <.IXIC> was down 0.18 points, or 0.01 percent, at 3,142.13.
UPS shares lost 2.4 percent to $79.29 after reporting fourth-quarter earnings that were below analysts' estimates on Thursday and forecasting weaker-than-expected profit for 2013.
Constellation Brands shares tumbled 17.4 percent to $32.36 after the U.S. Justice Department moved to stop Anheuser-Busch InBev from buying the half of Mexican brewer Grupo Modelo that it does not already own. Constellation would have distributed Corona beer in the United States if the transaction had been approved.
Thomson Reuters data through Thursday morning shows that of the 231 companies in the S&P 500 that have reported earnings this season, 69.3 percent have exceeded expectations, a higher proportion than over the past four quarters and above the average since 1994.
Overall, S&P 500 fourth-quarter earnings rose 3.7 percent, according to Thomson Reuters data. That's above a 1.9 percent forecast at the start of the earnings season but well below a 9.9 percent profit growth forecast on October 1.
(Reporting By Angela Moon; Editing by Nick Zieminski and Kenneth Barry)