Equity markets rebounded on Tuesday after some better than expected inflation data but don't read too much into the move. The PPI data was better than expected at the headline level but still up 0.8% from last month and 10% from last year. With input prices still on the rise and oil trading near $100, producer prices and consumer prices are still going higher and there is the FOMC to consider as well. The FOMC will release the March policy statement Wednesday afternoon and is virtually guaranteed to hike rates by at least 25 basis points.

The biggest risk for the market is the first hike will be larger than expected and/or come with a more hawkish than expected outlook. In that scenario, the odds of stalling the economy will rise because higher interest rates could lead to higher inflation in the near term at least. A stalled economy could easily turn into a recession.