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This market getting comfortable with June hike

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Stocks appear increasingly comfortable with the idea of a summer interest-rate rise.

The major averages have held steady since the Fed minutes and key policymaker comments in the past week indicated a hike could come as soon as next month.

"If they continue to talk the rate higher and the market continues to hang in there, then there's a good chance they move in June," said Jonathan Golub, chief equity strategist at RBC Capital Markets.

Volatility has also fallen, as seen in the CBOE Volatility Index, widely considered the best gauge of fear in the market. The "VIX" has held below 16 so far this week, well below the 20 to 40 range seen during the stock market correction in late August, which delayed the Fed's first hike in nearly a decade to December from September.

"If the Fed tightens … for the right economic reasons, that's kind of like December," said Ben Pace, chief investment officer at HPM Partners. "Now if you have improved data I think the markets can handle a tightening."

The VIX spiked to 17.65 on Thursday, its highest since mid-March, as New York Fed President William Dudley said June was definitely a live meeting and the June 23 Brexit vote on whether the U.K. will leave the European Union complicated that decision. However, the VIX ended the week lower at 15.2 on Friday and stocks recovered most of their losses for the week, with the S&P 500 snapping a three-week losing streak.

On Tuesday, stocks rallied as a new poll showed less support for the U.K. leaving the EU. The Dow and the S&P were up 1 percent Tuesday morning.

Earlier this year, the VIX spiked above 30 again and stocks sold off sharply as the Fed seemed set to hike rates four times, while data pointed to weak economic growth. Since then, improvement in data has lifted CNBC's Rapid Update's GDP outlook to an annualized 2.5 percent growth rate for the second quarter, versus 0.9 percent in the first quarter. The Fed lowered its projections to two hikes this year at its March meeting.

That move pushed market expectations for the next hike far past the summer, and the central bank has struggled to keep markets prepared for the possibility of a June hike.

Market expectations for a June hike jumped Wednesday after the Fed minutes release and have stayed above 30 percent since then, according to CME's FedWatch tool. Expectations for a July hike rose from 38 percent last Wednesday morning to more than 60 percent Monday.

"My bottom line was equity markets have probably discounted more of a June rate increase than the fed funds futures do," Nicholas Colas, chief market strategist at Convergex, told CNBC on Friday. He said stocks were also pricing in a greater chance of a June hike than the 2-year yield, which rose above 0.90 percent Tuesday.

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To be sure, the Fed could keep monetary policy unchanged at its June 14-15 meeting, set just eight days before Britain's vote. The next Fed meeting is July 26-27.

Ahead of that time, the Fed's emphasis on a gradual pace is important.

Any rate increase and expectations about one have implications beyond stocks to the U.S. dollar, commodities and emerging markets. Rollover in the last two could generate another bout of market volatility that pressures U.S. stocks, while sharp gains in the dollar have hurt corporate earnings.

But the currency may also be more comfortable with the Fed's recent hawkish tone, or at least expecting a very gradual pace of tightening. The U.S. dollar index is up 1 percent over the last five days. The S&P 500 was up nearly 1 percent in that time, while the Nasdaq was outperforming with a 2 percent gain.

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The next key commentary for stocks will be Fed Chair Janet Yellen's scheduled remarks Friday, when she receives an award from Harvard. But economists expect her speech on policy and the economy on June 6 to be more important, and since it follows the May jobs report, it could offer far more clues about the Fed's thinking ahead of its June meeting.