A few pieces of the soft-landing puzzle have already fallen into place: last week's nudge-up in unemployment claims, Wednesday's drop in new home sales for April (meaning higher mortgage rates, pushed up by the Fed's hikes, may be having an effect), and on Thursday, the National Association of Purchasing Management's report that manufacturing activity slowed in May. Good numbers on Friday meaning bad news for those on the unemployment line could finally convince investors that the Fed's work is done. "A tight labor market is historically the key factor in inflation, and it's the barometer Greenspan takes very seriously," says TIME senior economics reporter Bernard Baumohl. "If there's no sign of unemployment going any lower, it could convince the markets that this extended period of rate hikes will end in June, probably with one more quarter-point raise." The markets can handle that, as long as they feel confident it'll be the last. And it's confidence, or rather the lack thereof, that's been keeping rallies like Tuesday's (and Thursday's, if the employment numbers fail them) thin and insubstantial.
The paper bulls that ran NASDAQ up 8 percent Tuesday may be just about ready to become flesh and blood. Feeling cautiously optimistic about a string of economic numbers that point to a long-awaited, inflation-thwarting slowdown in the U.S. economy, investors set aside Wednesday's profit-taking and starting buying tech stocks again. By early afternoon, the NASDAQ was up 150 points and the Dow, led by Hewlett Packard's nine-point surge, had ridden the tech coattails to a 100-point rise. Trading volume was on the rise after several underpopulated sessions, and now even cautious investors seem to be coming forward with fistfuls of money, ready to bet on the bulls but they're waiting for one last piece of news, the one they think might finally get Alan Greenspan off their back: the Labor Department's May employment report, due first thing Friday morning.