The day begins with a similar pattern shaping up to that seen in late March when the healthcare bill drama was highest.  Said drama translated to the biggest 90 minutes of losses in stocks since the election.  Yesterday's release of the FOMC Minutes had a similar effect, both because the Fed confirmed that it would soon be removing more accommodation from the market (by reducing its balance sheet reinvestments)  and because the Fed seems to increasingly be concerning itself with what's going on with equities markets (they mentioned it a few times in the previous meeting minutes and several more times in yesterday's minutes).

In general, the Fed thinks high stock prices are both good and bad.  On the one hand, several Fed members noted that higher stocks contributed to an easing of "financial conditions" (whatever that means... seriously, what's the Fed getting at?  More people have more money because their stock portfolios are doing well?  Is that what we want in a domestic economy fraught with wealth inequality?).  On the other hand, other Fed members noted that stocks look overvalued.  

The Fed has to be careful about commenting on how high/low stocks are and should be.  It's not their job to police equities markets except inasmuch as they can connect stock volatility to their little-discussed 4th mandate: financial stability.  The Fed is most frequently said to have the dual mandate of "price stability and full employment," but if you ask them, they have a whopping FIVE mandates. Check it out -- specifically: "promotes the stability of the financial system and seeks to minimize and contain systemic risks through active monitoring and engagement."

That means that if the Fed is concerned that equities look overvalued, and that markets might have overly-lofty expectations for fiscal policy (they said that too), they could easily view higher stock prices as a risk to financial stability--one they need to take action to address.  The only way they take such action is to remove monetary accommodation.  While this does imply a decrease in bond buying and an increase in the Fed Funds Rate, those detractors are somewhat offset if the Fed is successful in keeping stock prices in check.  Case in point: yesterday's stock sell-off was on the same level as the biggest since the election.  It wasn't a game changer for bonds, but it helped facilitate some gains (money fleeing stock markets has to go somewhere).

All of this means we should increasingly keep an eye out for the Fed mentioning the stock market.  At the very least, some Fed members are concerned about the relentlessness and trajectory of the stock rally.  They may not say outright that this is motivating decisions to remove accommodation, but if they hint at it any more than they already have, it could be grounds for a surprise party for bond markets.  Otherwise, we're coping with the same old 2017 range.