The Fed will likely kill the market rally, says Trivariate's Adam Parker

Analyst Eyeballs Inflation Risk

Significant inflation could be just around the corner,causing the Federal Reserve to exit its bond buying support of the stock market in short order,according to Peter Boockvar,chief market analyst at the Lindsey Group.I think it's a big deal,Mr.Boockvar told CNBC.We've had multiple data points pointing to a bottoming in inflation.Gasoline prices are at their highest level since July.
If there's one thing that could handcuff Fed policy,it's a rise in inflation.According to the Fed's measure,we're far away from it.I think it's important in gauging the timing of the exit strategy.A faster uptick in inflation could hasten that exit strategy faster than the Fed thinks.You get back to that 2% level faster than the Fed thinks and you're going to see rate hikes faster than the Fed expected,Mr.Boockvar pointed out.
The Thomson Reuters/Jefferies CRB Index of 19 commodities,a widely recognised benchmark for commmodities trading,is at its highest point since October 2012.A closely watched measure of inflation,the Consumer Price Index,will be released later today.
On Monday,the markets shrugged off Ukraine worries on strong retail sales and Citigroup earnings.
Citigroup(C)

Inflation Data Looms

Two key readings on inflation will be released Thursday and Friday.Should there be a pronounced uptick in the core Producer Price Index(PPI) and Consumer Price Index(CPI),stocks may be expected to decline.Any such indication that the Federal Reserve will be more likely to raise interest rates in order to rein inflation in,will bring the bears out in force,resulting in a wave of selling.Stocks are already under pressure from a rise in government bond yields.One approach to this danger is to keep new money in money market funds through at least the weekend.