FED setting the market

Stocks and bonds have always responded to the latest economic data releases. But with the Federal Reserve potentially set to hike rates as early as June, the markets' data dependency could degenerate into a full-out data addiction.

It's not that investors have suddenly taken a greater interest in the growth rate of the economy. Rather, since the general trend of growth puts the Fed on pace to hike raise, each individual data point is starting to take on a greater import.
With the Fed's next statement set to be released on Wednesday, the latest market parlor game is whether the Fed will drop the word "patient" from its guidance about the pace at which it will normalize monetary policy.

For instance, stocks rose sharply on Thursday's open after the retail sales number for February showed a surprising 0.6 drop. The bullish interpretation of the dire figure was that the Fed won't raise rates if the consumer continues to struggle.

Wall Street is unsure not only when the Fed will normalize policy, but why. As a result, it's become a tough time to commit money in the fixed income world.
"This fixed income market is one of the least convicted that I've ever seen in terms of trades that are being placed," said Karissa McDonough, director of fixed income strategy for People's United Bank Wealth Management.
In other words, the new version of "not fighting the Fed" may be to play for (or at least prepare for) greater volatility over the next few months, particularly in U.S. Treasurys.