Next Week's Risks

US economic data and Fed speeches in the first half of next week risk highlighting the potential for a Fed rate hike.  But, they are not likely to stand in the way of month-/quarter-end buying in the stock market.  And, Friday's Employment Report risks providing some relief.

Monday
1.  Consensus risks being too low on the February Core PCE Deflator.

       a.  Consensus is +0.2% m/m and 1.7% y/y (the latter steady with January).

2.  A 0.3% m/m cannot be ruled out, however, as the high 0.3% Core CPI was fairly widespread.

3.  And, the y/y for the Core PCE Deflator could easily print 1.8%, as the base effects make for an easy comparison (and assuming no downward revision to January).

4.   A high Core PCE Deflator is probably not enough to prompt the Fed to tighten in April, however.

      a.  Yellen already appeared to dismiss the high Core CPI, blaming special factors.  And, she is right that the jump in apparel prices looked to be a result of early introduction of Spring clothing in stores -- and should unwind in coming months.

Tuesday 
Fed officials are speaking.  They could underscore the potential for a Fed rate hike.

1.   Johns Williams, President of the San Francisco Fed, is a perennial hawk and speaks early Tuesday.

        a.  He has argued for a Fed rate hike ahead of almost every FOMC Meeting in the past couple of years.

         b.  He was right only once.   And, I don't believe he has ever dissented when the FOMC decided not to hike.

         c.  I'm thinking that he's playing a role similar to that played by Larry Meyer when he was a Fed governor under Greenspan in the late 1990s.  Both talked up the need for tightening, attempting to hold back excessive market reaction to the Chairman's intent not to tighten.  If that's the case, any market reaction to Williams' speeches should be faded.

2.  Yellen speaks on the Economic Outlook and Monetary Policy to the Economics Club of New York mid day.

        a.  This venue was used by Greenspan on occasion to announce intentions to change policy.

        b.   I doubt that Yellen will do the same now.   There is no reason why she should change the message she gave at the post-FOMC press conference -- emphasizing downside risks from financial markets and global economy but still leaving open the door for a rate hike at any upcoming FOMC Meeting.

Wednesday
1.  The March ADP Estimate risks printing above 200k, as the high +230k Private Payroll gain in February feeds into the calculation of this number.

        a.   If the March ADP Estimate is strong, it risks overestimating Friday's March Payrolls.

2.  The March FOMC Minutes will probably not shed any new light on the probability of a Fed rate hike in April, May or June.

Friday
1.  March Payrolls and Average Hourly Earnings risk printing below consensus.

       a.   Consensus is +205k Payrolls and +0.2% AHE.

2.   March Payrolls have slowed sharply after a strong February in 2 of the past 3 years:

                      Nonfarm Payrolls (m/m change, 000s)
                      March          February
2016              na                 242
2015              126              264
2014              192              197
2013                88              268

3.  Average Hourly Earnings risk printing 0.1% m/m, based on calendar considerations.  The y/y should fall to 2.0-2.1% from 2.2% in February.