The rebound in equities faltered on Monday and for good reasons. Not only is there a key read on inflation due out at the end of the week but the price of oil is rebounding. The price for WTI gained more than 2.5% at the height of the session to top $111.75 on its way back to the short-term moving average at $113.37. If the market gets above that level we see the price of WTI moving up to retest and possibly set a new all-time high and drive inflation to new levels. In regards to inflation, the PCE price index is due out on Thursday and it is expected to be hot. The core PCE is expected to accelerate a tenth to 0.4% on a month-to-month basis and drive the YOY gain to over 5.0% to put even more pressure on the FOMC to act.

The latest read on the FOMC is that a 75 basis point interest rate hike will come in July and another one is likely in August. This will put rates at 3.0% to 3.25% by the middle of summer versus the end of the year as was predicted just a month ago. If the PCE data is hotter than expected it is likely the FOMC will increases rates at an even more aggressive pace and potentially throw the economy into a lengthy recession.