Why the jobs report will decide the markets' tempo in the coming weeks

The market will be laser-focused on the employment report Friday before the market opens. After another turbulent week of tweets, threats and tariffs, the markets are finally settling down to the business at hand.

Friday's nonfarm payrolls report for March could set the cadence for all capital markets for the next few weeks. The key takeaway for equity, fixed income and currency traders will be the state of the U.S. worker: Are wages finally starting to rise in consistently?

The market's expectation

The market is looking for only a meager 0.2 percent gain in wages. If that's all we get, the risk-on rally in stocks and currencies could hit a snag as markets will continue to question whether the Federal Reserve has the data to pursue its normalization policy.

On the other hand, if wages rise by 0.4 percent, the news could boost equities and the dollar with a massive rally into the week's close.

Wages' market message

Higher wages will suggest that U.S. recovery will have the fuel to continue into the second quarter, and investor sentiment should perk up markedly as growth and earnings will be revised higher.

Furthermore, real average hourly earnings rose both on a month-over-month and year-over-year basis in February, reflected in prior employment reports. If average hourly wages — which last came in at $22.40 — can climb by just one thin dime to $22.50, this would translate to 2.7 percent annual wage growth and place markets in an overall ebullient mood.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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