A rate hike from the Federal Reserve in the coming week will do nothing to shock Wall Street. What could make Wall Street nervous, however, is how the Fed balances the doves and the hawks to provide a rate hike timeline that doesn't rattle investors.
Wall Street has slowly grown accustomed to the likelihood of three rates hikes this year. A hint of any more than that could cause market waves.
"The challenge for the Fed now is to ensure that the market doesn't start extrapolating a much more rapid series of hikes," said Luke Bartholomew, investment manager at Aberdeen Asset Management. "Investors are comfortable with three hikes this year but any suggestion of four will probably cause a wobble."
The Fed's policy-setting group, the Federal Open Market Committee, will meet on March 14-15 with an announcement set for Wednesday afternoon. The Fed will also release updated forecasts, including the '"dot plot" matrix that visualizes each Fed member's expectations for the pace of future hikes.
Chances of a 25-basis-point increase to interest rates have risen in recent weeks as Fed members touted economic improvement and pointed to increasing inflation as reason to move to avoid falling behind the curve. An interest rate hike on Wednesday held a 91% chance as of Friday, according to CME Group.
The February jobs report, released on Friday, made the likelihood of a March rate hike all but a certainty. Solid job gains support the Fed's recent hawkish rhetoric and insistence that the U.S. economic recovery warrants more than one rate hike this year.
It's also a busy week of economic data. Producer prices for February will be released on Tuesday; the consumer price index and retail sales for February, the Empire State Manufacturing Survey and the housing market index for March, and business inventories for January are set for Wednesday; housing starts for February, the Philadelphia Fed Business Outlook Survey for March, and JOLTs for January on Thursday; and industrial production on February, and consumer sentiment for March on Friday.
It's a quiet week for earnings as the reporting season draws to a close. Earnings of note in the coming week include Bon-Ton Stores (BONT) , DSW (DSW) - Get Designer Brands Inc. Class A Report , HD Supply Holdings (HDS) - Get HD Supply Holdings, Inc. Report and YY (YY) - Get YY, Inc. Sponsored ADR Class A Report on Tuesday; Guess? (GES) - Get Guess?, Inc. Report , Jabil Circuit (JBL) - Get Jabil Inc. Report , and Oracle (ORCL) - Get Oracle Corporation Report on Wednesday; Adobe Systems (ADBE) - Get Adobe Inc. Report , Dollar General (DG) - Get Dollar General Corporation Report and ExOne (XONE) - Get ExOne Co. Report on Thursday; and Tiffany& Co. (TIF) - Get Tiffany & Co. Report on Friday.
Trading could become more volatile on Friday during the quadruple-witching session, one of four days of the year in which futures and options contracts expire at once.