On Friday, the Bureau of Labor Statistics (BLS) likely will provide continuing evidence that the U.S. job market is healthy. The report will be the first major indicator of 2Q economic activity. It is sure to get extra scrutiny after last week's report on 1Q GDP showed a deceleration in growth to a below-consensus 1.6%, with slower consumer spending. Persistent signs of inflation in the GDP report pushed expectations for rate-relief from the Fed out to September. One reason the April jobs report will be under a microscope was articulated by economist Claudia Sahm in a November 2023 post on the social media site X. "Relatively small increases in the unemployment rate, even starting from low levels, typically signal a recession." That underlies her Sahm Rule recession indicator, which posits that an economy is likely to enter a recession when the three-month average unemployment rate rises by 50 basis points (bps) or more from its prior 12-month low (currently 3.5%). The St. Louis Fed tracks the real-time Sahm Rule on its FRED database. The recession indicator is at 0.30, which is below the critical 0.50. Based on our calculations, unemployment would need to rise to 4.3% to trigger the indicator. While this is well above the 3.8% we expect, the market will be considering future scenarios because the stakes are so high and because Core PCE for March (reported Friday) remained belligerent at 80 basis points above the Fed's 2% inflation target. That could cause the Fed to think twice about preventative stimulus. We expect Friday's employment report to show that April payroll growth moderated to a still-healthy 200,000, from 303,000 in March. We expect that growth in average hourly earnings remained at 4.1%, and average hours worked stayed at 34.2. The best news might be that payrolls remained strong, with softer wage growth cooling inflation fears. The worst news, which we don't expect, would be signs of stagflation -- weak payrolls and accelerating wage growth.

The Nasdaq 100 (QQQ) rebounded to its 21-day exponential average and a 50% retracement of the recent pullback on Friday, and then stalled. As long as the index does not make a lower low, the next and more-important resistance is the breakdown level up at 435 -- which is also a 61.8% retracement and the location of the 50-day moving average. The two most-common pullbacks are a three-wave and a five-wave decline. It is still unclear what is currently in play, but we would lean toward a new pullback low.

Monday Tee Up: Here Comes the Fed, And More

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In this edition, setback shouldn't hold back inflation progress; Charter's future quarters look promising; a mixed bag for Roku; and CyberAgent, Keppel REIT, and Melexis.

U.S. stocks rose on Friday morning following PCE data. The Fed's preferred inflation indicator, the personal consumption expenditures index (PCE), rose 0.3% in March, which was below estimates of a 0.5% increase and matched the increase in February. Core PCE also rose 0.3%, which was steady from last month and in line with estimates. The latest readings bring the annual rate for headline PCE to 2.7%, up from 2.5% in February, and core PCE to 2.8%, which was unchanged from last month. The Dow was down 0.4%, the S&P 500 fell 1.1% and the Nasdaq lost 2.1%. Crude oil is trading near $84 per barrel and gold is up $5 to $2348 per ounce.