Data brings more focus on timing of U.S. rate hike

Sun Mar 8, 2015 8:21am EDT
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By Caroline Valetkevitch

NEW YORK (Reuters) - U.S. stock investors may be bracing for further signs next week that the Federal Reserve could increase interest rates sooner rather than later, with retail sales expected to rebound after two straight months of declines.

A pickup in retail sales could show consumers are benefiting from sharply lower oil prices, but analysts say spending in February was likely curbed by unusually harsh weather in parts of the United States.

Friday's stronger-than-expected jobs report boosted expectations of a U.S. rate increase as soon as June, causing the market to sell off.

The S&P 500 ended the week more than 2 percent off its March 2 closing record high, while the Nasdaq was more than 70 points off the 5,000 mark, which it hit this week for the first time since March 2000.

Comments from some Fed officials underscored expectations of a June rate hike. Among them, Richmond Federal Reserve President Jeffrey Lacker repeated his view that the Fed should raise rates in June.

"The Fed is back at the top of the circle" in terms of the investor focus, said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

"I think they're feeling some pressure to show that they really are data driven. The economy has been getting better, and what I think they're trying to do is overstay the party to make sure the economy really is better."

In the jobs data released Friday, unemployment dropped to a six-year low of 5.5 percent last month, within the range the Fed considers to be full employment. A Reuters poll conducted following the report showed many of Wall Street's biggest banks are more convinced the Fed will raise rates in June.   Continued...

Traders work on the floor of the New York Stock Exchange in New York January 2, 2015.     REUTERS/Carlo Allegri