What to watch

Will Fed minutes signal ‘live’ June meeting?

Monday, Wall Street wasn’t worried much about the Federal Reserve raising interest rates at its June meeting. Futures markets placed chances of a hike next month at roughly 4%.

But that was before data released Tuesday showed inflation at the consumer level ticking up 0.4%, the biggest monthly gain in the consumer price index since February 2013 — or more than three years ago. That got the attention of Wall Street, which now thinks the Fed has more hard data to make a case for hiking rates in June. Adding to the rate woes were comments from two Fed members Tuesday that suggested there was still a chance for two and maybe even three rate in- creases this year.

The latest rate angst makes Wednesday’s release of the minutes of the Fed’s April meeting even more important. Futures markets are now pricing in 19% odds of a June hike, still low but up sharply from Monday. The Dow fell 181 points to 17,530 Tuesday on rate-hike fears.

Investors will scrutinize the Fed minutes for any clues of a rate hike coming sooner rather than later. They’ll also look for signs of rising dissension from Fed hawks, or members pushing for a rate hike.

“The market has very little priced in relative to Fed commentary, and there is a mismatch,” says Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management. “The market is basically saying, ‘ We don’t believe you, Fed.’ The risk is that the market gets surprised.”