"To come in in April and reopen the door that the Fed might move in June, it's like reopening Pandora's box … why not let the easing of financial conditions settle in. … Let the paint dry and then worry about it later on," said Caron. "This is very much the optimal control of [Fed Chair] Janet Yellen. Let the economy run hot. Let inflation pressures percolate. They can always hike faster later."
Diane Swonk, CEO of DS Economics, said she is now leaning toward September for a rate hike, rather than June. "If the Fed intends to raise rates in June, they need to do some heavy lifting in terms of changing market expectations. … They don't want to shock the markets, and the June meeting is one week before Brexit," she said. Brexit is the U.K. vote June 23 on whether to leave the European Union, seen as a potential negative for both the U.K. and Euro zone economies.
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Swonk said the backward-looking GDP data Thursday will probably not be that important to the market's view of the Fed, but Friday's data could be. "The next shoe to drop is Friday, and that's the PCE deflator. I think the PCE deflator is going to moderate a bit. It was up at 1.7 percent so if it comes down to 1.6 or 1.5 … I think it got a little ahead of itself," she said. The deflator is the preferred inflation measure of the Fed, which noted that inflation looks like it will continue to run below its target of 2 percent.
Earnings Thursday are also expected form Colgate-Palmolive, Honda Motors, ConocoPhillips, Domino's Pizza, CME Group, SiriusXM, Beazer Homes, Viacom, Brunswick, Dunkin' Brands, Oshkosh, Volkswagen and Bristol-Myers Squibb, all before the open. Afternoon reports are expected from Amgen, Western Digital, Skyworks Solutions, AppliedMicro, Groupon, Pandora Media, Virgin America, Outerwall and Expedia.