The S&P 500 reversed course this afternoon after nearing all-time highs following the correction that began in January. Why? Well at first it was the weaker housing starts number for January that came out this morning but it is pretty clear that the release of the minutes from the Federal Reserve’s open markets committee (FOMC) meeting from January is what has the market spooked (see chart).

While the rest of the world were discussing whether or not the Fed would have to slow down the pace of tapering after recent poor economic numbers, it turns out that the Fed was actually discussing when to begin tightening interest rates.

This is a huge disparity and justifies the market’s reaction but before anyone panics we should think about a few things.

One, some of the analysis of the minutes discusses the Fed recalibrating its threshold to “begin” considering tightening. Last year Ben Bernanke added some specifics to the endless zero interest rate policy and one of the things he cited that needed to happen before a tightening would be considered was the unemployment rate coming down to 6.5%. It is getting close so it is appropriate for the Fed to consider this, especially since it has come down in an unimpressive fashion—more due to people falling off the job rolls than strong growth in nonfarm payrolls.

So while there may be some hawks considering speeding up tightening, more of the discussion was on how to explain not tightening once that threshold is hit.

Two, while the minutes showed a clear commitment to tapering, this is somewhat dated coming before the January employment numbers.

It seems appropriate not to let one bad data point—the December jobs report—affect a policy, tapering, it took so long to get to, but the economic reports that have come out since the minutes were taken —specifically the January employment report and recent housing numbers — have not been good.

In a perfect Fed world that December number could be dismissed as an anomaly but that appears no longer to be possible and as the facts change so likely will the perspective of the Fed.