Investors are hoping a strong December jobs report and dovish words from the Federal Reserve chairman will ease rising concerns about an economic slowdown.

The December employment report, released at 8:30 a.m. ET Friday, is expected to show 177,000 non-farm payrolls were added, after 155,000 in November, and an unchanged unemployment rate of 3.7 percent, according to Thomson Reuters. Traders were encouraged ahead of the report by strong ADP payroll data, with 271,000 new jobs in December.

The jobs report also comes on the heels of Thursday's shockingly weak ISM manufacturing survey, down 5.2 points to 54.1, the largest one-month decline since the financial crisis. The report, which still shows an expanding economy, was worrisome because it contained an 11-point drop in new orders.

The ISM report added to a weak market tone Thursday, already negative after Apple's warning Wednesday that iPhone sales were down in China and revenues would be sharply lower. Apple blamed trade wars for the decline, and the ISM report only added to fears that trade was a potential catalyst for a broader global slowdown.

"You had some really strong ADP data the market completely ignored. Then you had a pretty horrendous ISM print that the market really reacted to strongly. That makes the setup for [Friday] interesting. It wouldn't matter if the data is good, but it will matter if it's bad," said Tom Simons, chief money market economist at Jefferies.

Not long after the employment report, Fed Chairman Jerome Powell joins a panel at 10:15 a.m. ET with former Fed chairs Ben Bernanke and Janet Yellen. The event will be at the American Economic Association's annual meeting in Atlanta and moderated by Neil Irwin of The New York Times.

The Powell appearance has been widely anticipated in markets, even though many economists do not expect him to provide much new insight into policy. Powell's last appearance was at the briefing following the Fed's rate meeting in December, and he spooked markets when he said that the Fed's policy of winding down its balance sheet was on "auto pilot." Markets are looking for Powell to show some flexibility on that program, under which the Fed has been shrinking its balance sheet by allowing securities to roll off as they mature.

"I'm worried we're overhyping this appearance a little bit. It could be a real fluffy event," said Simons. "Attention is going to be split up over three different people who are going to be talking about different things, and two of whom are going to be speaking in retrospect."

Investors have been speculating that Powell could send a dovish message to intentionally reverse the impression he gave after the rate hike.

"I think he has to be careful with the sequencing. I think first he has to tell the markets he's going to take a pause on rate hikes before he starts talking about the balance sheet," said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

Markets have been concerned that the Fed is heading for a policy mistake, of tightening too much in a too-weak economy.

"The important thing about today is that the market has this belief that if the Fed is done, that's good. They're not hiking anymore, that's good. But they're stuck with a still-fat balance sheet and a 2.25, 2.50 percent fed funds rate. If we get a poor payroll number that could be a precursor to jobs weakness," said Boockvar. "You want the Fed to be done with their hiking cycle because they think they've done their job. You don't want the Fed to be done with their hiking cycle because the economy is weakening in its face."

Boockvar said the risk is a self-fulfilling prophecy where stock market weakness leads to a recession.

The stock market fell sharply Thursday, and buyers bid up bonds, sending yields to fresh lows. The Dow was down 660 points, or 2.8 percent, while the Nasdaq, hit hard by Apple, was down 3 percent at 6,463. The sank 2.5 percent to 2,447.

The 10-year Treasury yield was at 2.55 percent, the lowest in a year. But even more significant, yields on shorter-duration notes rose above longer-duration yields. For instance, the 7-year yield, at 2.43 percent, fell below the 1-year note, at 2.52 percent. The 2-year note yield, at 2.38 percent, was below 2.40 percent, the effective federal funds rate.

"It means the market is pricing in a recession risk in the next 24 months," said Ian Lyngen, head of U.S. rate strategy at BMO. Lyngen said the market is also indicating an interest rate cut by the Fed is also possible within 24 months. The futures market is currently not pricing in any rate hikes, though the Fed forecasts two hikes this year.

Lyngen said the 10-year yield could continue to move lower Friday and the ISM data could be signaling a change in the economy. ""They've just reversed any expectations for any further momentum. Trumponomics, even in the corporate sector that also benefited from the GOP's tax reform, has now priced it out," said Lyngen.

Joe LaVorgna, chief economist at Natixis Americas, said the Fed has to pause. He said the trade war is a big worry for markets, but the Fed is bigger.

"The fear is people are going to lump the trade war as an excuse for everything, and it may work, and if there's a deal, there might be a bounce. That's a bear market trap if the Fed does not relent," said LaVorgna.