So, what does this mean for the Federal Reserve?
I don't think it changes much. March is still off the table. June is still on the table — but not likely.
The market had every reason two months ago to go over the edge into the abyss and we did not. Day after day, the market came under more pressure as massive amounts of sovereign wealth money came out of the market, yet the market held up incredibly well — even as the data were suspect.
Why? Because the buzz about negative rates around the globe has investors convinced that the Fed won't raise anytime soon and that even deeper negative rates are on the near term horizon — Think European Central Bank meeting next week.
After the report, former Philadelphia Fed President Charles Plosser suggested that the next hike, whenever it comes, could be 50 basis points, or half a percentage point. I think the market action is discounting this as well because the Fed has worked hard at trying to be as transparent and as cautious as they can be — so a 50 bps increase would run counter to everything they have convinced markets to expect.