×

Fed-watch: The great rate debate rages on

The great rate debate rages on.

Wednesday's Fed minutes left the markets wanting, with enough nuance to keep Wall Street divided over whether the first rate hike comes in September or later. That means the scrutiny of each piece of data, and particularly job-related or inflation data, will be intense.

Thursday's economic releases include jobless claims at 8:30 a.m. ET, and existing home sales, leading indicators and the Philadelphia Fed survey at 10 a.m. The Philly Fed survey will be key, after the Empire State survey earlier in the week plunged to a 2009 low.

Read MoreFed 'approaching' hike conditions: Minutes

Traders work on the floor of the New York Stock Exchange.
Getty Images
Traders work on the floor of the New York Stock Exchange.

"My interpretation was there was some acknowledgement (in the minutes) that the data has not challenged the inflation target, so that led one to believe they might pause," said Mark Luschini, chief market strategist at Janney Montgomery.

Read MoreMarkets more about oversold conditions than the Fed minutes

Stocks tumbled Wednesday with the Dow off 162 at 17,343 on a combination of China worries, plunging oil prices and uncertainty about when the Fed will raise rates. Stocks were volatile, regaining some ground after the minutes, but then moving lower again.

The dollar weakened and Treasury yields fell, as traders took the Fed's afternoon release of minutes to be dovish.

"I expect we will have more volatility as we draw closer to the September meeting. I don't know if we see wild swings like we saw today. That was pretty spectacular," said Luschini. "Absent market friendly news, there's no catalyst to unlock the stock market from this trading range we're in, which is exceedingly narrow."

Read MoreChair Yellen, please take your victory lap!

The S&P 500 fell 17 points to 2079, just above its 200-day moving average of 2077.

Oil prices will stay in focus after the 4.3 percent drop in West Texas Intermediate oil futures pushed energy stocks sharply lower. The S&P energy sector was off 2.8 percent.

The weakness in oil added fuel to the debate about whether the Fed will be comfortable enough with the direction of inflation to raise rates in September. Traders in the futures market reduced bets on a September hike and even a December rate hike, putting more emphasis instead on a first hike in January.

The next big report for the Fed will be the Sept. 4 jobs report, but Wall Street is now watching other data.

"I guess they're watching everything, but it's the jobs number, the dollar and oil prices," said J.P. Morgan economist Bob Mellman. He expects the Fed to hike rates at its meeting on Sept. 16 and 17.

Read MorePaulsen: I'm investing against strong-dollar theme

"We still have a September call. We've thought it is a pretty close call for quite a while, and we still do," said Mellman.

Besides data, there are earnings from Royal Ahold, Madison Square Garden, Sears Holdings and The Buckle, before the bell. After the bell, reports are expected from Hewlett-Packard, Gap, Ross Stores, Salesforce.com, and Fresh Market.

Read MoreMore traders see Fed taking a pass on September hike