December jobs report
"The big move was the fact that average hourly earnings came in lower than expected. That suggests that investors are focused intently on inflation, and whether that inflation is moving toward the Fed's target," said Michael Arone, chief investment strategist at State Street Global Advisors. "Data like today suggests the Fed could do 50 basis points," said Arone. A more aggressive Fed could create more market volatility.
"It's pricing 100% chance of a 25 basis point hike, and a 30% chance for an additional 25. Peak fed funds is still at 5%" for July, he said. "The market is still expecting the Fed to go another 60, almost 70 basis points," he said. Boockvar said the end point for the Fed matters more than if it raises by 25 basis points or 50 when it next meets.
This will drive the next inflation spike starting with energy.