(REUTERS) - Wall Street eased on Thursday after the Dow posted its best run in nearly three years, but hopes Friday's key jobs report would underscore signs of strength in U.S. economy kept investors engaged.

U.S. companies probably stepped up hiring in November, which could add to expectations of stronger economic growth in the fourth quarter. Non-farm payrolls are forecast to have increased 122,000 after October's 80,000 gain.

But a stronger than expected private ADP employment report earlier in the week caused some analysts to up their payrolls forecasts and has raised expectations heading into Friday.

At this point in time we are definitely building for a better payrolls number, said David Lutz, a trader at Stifel Nicolaus Capital Markets in Baltimore, who cited Wednesday's ADP report and also signs of strength in retail sales.

The financial sector, the strongest gainer in Wednesday's four percent rally, gave back some of its gains and dragged on the market. The S&P's financial index fell 1.5 percent. Bank of America fell 1.6 percent to $5.35.

In the latest piece of better-than-expected data, the pace of growth in the U.S. manufacturing sector picked up in November to its strongest level since June, and new orders rose, according to a report from the Institute for Supply Management.

However, new claims for unemployment insurance rose last week in a reminder that any healing in the country's battered labor market will be slow.

The Dow Jones industrial average dropped 48.59 points, or 0.40 percent, to 11,997.09. The Standard & Poor's 500 Index dropped 4.51 points, or 0.36 percent, to 1,242.45. The Nasdaq Composite Index gained 1.87 points, or 0.07 percent, to 2,622.21.

The pullback was expected after Wednesday's rally, which came on news of a coordinated plan by the world's major central banks to boost liquidity, a move that alleviated financial stress from the Eurozone's debt crisis.

All three major indexes climbed more than 4 percent in Wednesday's broad rally on heavy volume, with the S&P posting its biggest daily gain since August. The Dow had its best run since March 2009.

Today's action is just a reaction to yesterday, which was such an impressive move that I'd feel pretty good if we just held close to even, said Mark Foster, who helps manage $500 million at Kirr Marbach & Co in Columbus, Indiana.

The ISM number was very strong and follows a lot of positive data that we've seen lately. That shows things are getting better, but it isn't enough to keep us going today.

Barnes & Noble Inc. plummeted 15 percent to $14.83 on heavy volume after it reported a quarterly loss. The bookseller was hurt by the cost for keeping its Nook e-reader competitive with other products such as Amazon.com Inc.'s Kindle.

Lululemon Athletica Inc. dropped 9.1 percent to $45.10 in U.S. trading after the yoga wear retailer's quarterly sales missed expectations.

On the upside, Yahoo Inc. gained 3.2 percent to $16.20 after Reuters reported Blackstone Group LP and Bain Capital along with Asian partners were preparing a bid for the Internet company.

China's factory sector shrank in November in the face of weakening demand both at home and abroad. The data may feed worries the global economy was sputtering.

(Editing by Kenneth Barry)