U.S. markets opened slightly lower on Friday after the monthly jobs report showed the headline unemployment number dipped below 4% for the first time since 2000.

That was the good news as the number of jobs created during the month fell short of expectations.

However, the major indexes rebounded shortly afterwards while adding steady gains throughout the session, to finish mixed for the week.

The Nasdaq zoomed 1.7% after testing a high of 7,228 while closing back above its 50-day moving average.

The Russell 2000 rallied 1.2% after trading to a high of 1,572 while clearing and holding its 50-day moving average, as well.

For the week, Tech added 1.2% while the small-caps were up 0.7%.

The Dow jumped 1.4% to regain the 24,000 level after testing a late session high of 24,333.

The S&P 500 soared 1.3% after reaching an intraday peak of 2,670 and is less than 1% away from clearing its 50-day moving average. For the week, the blue-chips added 0.2% while the S&P 500 slipped 0.3%.

Technology and Consumer Staples were sector standouts after rising 1.9% and 1.5%, respectively.

Financials were up 1.3% and Materials gained 1.2%. There were no sector laggards.

For the week, Technology were higher by 2.6% while Real Estate was up 1%. Health Care sank 3% and Consumer Staples were off 2.1% to pace sector weakness.

First-quarter earnings season is roughly three-quarters completed with 343 S&P 500 members, or roughly 70%, having reported earnings.

Total Q1 earnings are up 24% from the same period last year on 9.5% higher revenues, with 78.4% topping EPS estimates and 75.8% beating revenue estimates.

Looking at Q1 as a whole, total earnings are expected to be up 23% from the same period last year on 8.6% higher revenues, the highest quarterly earnings growth pace in 7 years.

Net margins are expected to increase 1.4% from the year-earlier period, with Finance, Technology, Industrials, Energy and Construction driving most of the margin gains.

Energy sector earnings are expected to be up 71.9% from the same period last year on 13.9% higher revenues. Excluding the Energy sector, total S&P 500 earnings growth drops from 23% to 21.4%.

For full-year 2018, total earnings for the S&P 500 index are expected to be up 19.1% on 5.6% higher revenues.

For full-year 2019, earnings are expected to rise 9.3% on 4.5% higher revenues.

The implied ‘EPS’ for the entire index, calculated using current 2018 P/E of 17.1X and index close, as of May 1st, is $152.60. Using the same methodology, the index ‘EPS’ works out to $166.84 for 2019 (P/E of 15.6X).

Global Economy – European markets closed higher across the board on Friday despite mixed economic news and statements.

Germany’s DAX 30 soared 1% and UK’s FTSE 100 rallied 0.9%. The Stoxx 600 Europe and the Belgium20 gained 0.6% while France’s CAC 40 was up 0.3%.

ECB Vice President Constancio said that the ongoing robust recovery the Eurozone is experiencing is a source of optimism for the immediate future while adding the Eurozone is much more resilient to possible external financial shocks.

The Eurozone April Markit composite PMI was revised lower to 55.1 from the originally reported 55.2.

Eurozone March retail sales climbed 0.1% month-over-month and 0.8% year-over-year, weaker than forecasts of 0.5% and 1.9%, respectively.

Asian markets were lower with Japan’s Nikkei closed for a holiday. Hong Kong’s Hang Seng sank 1.3% and South Korea’s Kospi fell 1%.

Australia’s S&P/ASX 200 gave back 0.6% and China’s Shanghai declined 0.3%.

The China April Caixin services PMI rose 0.6 to 52.9, stronger than expectations for no change.

Nonfarm payrolls increased 164,000 in April, missing the consensus forecast of 193,000. The unemployment rate fell to 3.9%, hitting its lowest since December 2000.

Average hourly earnings were up a modest 0.1%. The unemployment rate dipped to 3.9%.

Baker-Hughes reported that the U.S. rig count was up 11 rigs from last week to 1,032, with oil rigs up 9 to 834, gas rigs up 1 to 196, and miscellaneous rigs up 1 to 2.

The U.S. Rig Count is up 155 rigs from last year’s count of 877, with oil rigs up 131, gas rigs up 23, and miscellaneous rigs up 1 to 2. The U.S. Offshore Rig Count was up 1 rig to 19 and unchanged year-over-year.

Market Sentiment – Dallas Fed Robert Kaplan expects to see rising wage pressure after saying everything shows there’s wage pressure building, and less slack in the labor market.

He said the Fed should, therefore, continue to remove accommodation gradually.

The flatter yield curve tells him the economy is in its late cycle life, with out-year growth looking sluggish.

Atlanta Fed Raphael Bostic firmly supports three hikes this year, but he added that faster economic growth could require additional tightening, while slower growth could limit the year’s total to two.

He said the economy is pretty rosy and there’s a lot of upside potential. He also is willing to allow inflation to overshoot its 2% target, saying just because inflation goes a little above the 2% target doesn’t mean that analysts are going to panic or act in a dramatic way.

He said the Fed is willing to be flexible as the data takes us places.

San Fransisco Fed John Williams isn’t too concerned with inflation ramping up this year and reiterated that the inflation goal is symmetric, as indicated in Wednesday’s FOMC statement.

He went on to say he’s comfortable with overshooting the 2% target, for a while.

The iShares 20+ Year Treasury Bond ETF (TLT) traded higher for the second-straight session after reaching a peak of $119.23.

Fresh resistance is at $119.25-$119.50 following the close back above the 50-day moving average. Support is at $118.75-$118.50.

RSI is approaching resistance at 50 and prior support from March and April.

Continued closes above this level would be a bullish signal for a possible run towards 60-65. Near-term support is at 45-40.

The PowerShares QQQ (QQQ) made a run to $165.25 while clearing and holding its 50-day moving average into the closing bell.

Fresh resistance is at $165.50-$166 with continued closes above the latter being a bullish signal for higher highs. Near-term support is at $164.25-$163.75 with a move below the latter likely leading signaling additional weakness towards $162-$161.

RSI cleared resistance at 55 with continued closes above this level would be a bullish signal for a possible run towards 60-65 and the early March highs. Support is at 50.

The Spiders S&P Homebuilders ETF (XHB) has been in a mini-trading range between $38.50-$40 for the past 11 sessions. Friday’s high tapped $39.77 and cleared lower resistance at $39.75-$40.

Continued closes above the latter would be a slightly bullish development with additional hurdles at $40.50 and the 50-day moving average.

Near-term support is at $39.25-$39 with a close below $38.50 being a bearish development. Additionally, the 50-day moving averages fell below the 200-day moving average in late April to form a bearish death-cross.

RSI is approaching resistance is at 50 with continued closes above this level being a bullish signal and a short-term bottom in XHB. Support is at 45-40.

The percentage of S&P 500 stocks trading above the 50-day moving closed Friday at 46.53% from an intraday high of 48.51%.

Continued closes above the 50% level would be bullish for a possible run towards 55%-60% with the latter representing the monthly high. Support is at the 45%-40% level with risk to 35%-30% on a close below the latter.

The percentage of Nasdaq 100 stocks trading above the 200-day moving average is currently at 56.31% with Friday’s high reaching 57.28%.

Resistance is at 60% with the mid-April high at 65%. Support is at 50%-45% with a close below latter being a bearish development.

Existing Position Update

TSLA starting moving higher once again. Good chance that gap to the upside will fill next few sessions. Spread remains intact at this time.

PANW is headed higher but remains within zone of safety.

AAPL was liquidated – no sense in holding on for a few pennies for so much additional time.

Expect two new positions next week – waiting for market to show it’s hand.

Roger Scott