Interest rates are in the market. We're having a bit of trouble with the 11,000 range on the Dow and the 1290 range on the S&P 500 index. Both those levels trigger programmed trading. Outside of that automatic sell or buy signal, the biggest immediate worry in the market over the last week or so is interest rates - will they go up significantly? The Bank of Japan has indicated they will raise domestic interest rates, and perhaps start buying fewer foreign (US) securities, meaning that to attract their capitol the US long bond rate will have to go up.
The employment rate is at full employment in the US - 4.7% - and much lower in some locals - and since labor is generally the biggest cost of business, and the labor market is getting competitive, salaries may have to go up to attract new employees. One way to keep wages down under full employment is to increase productivity, but Tuesday's report that productivity slowed in the 4th quarter (-0.5% growth) indicates that that solution may not be adequate.
These are sending short term worries through the market that long term interest rates may be going up. That would have far reaching consequences, some good, some bad. Remember, just a short time ago, the big market fear was the inverted yield curve, that is, long term interest rates were too low. Any move by Japan is likely to be measured, and unless you are involved in Forex and the Yen carry trade, its unlikely to have any real impact on you.
Finally, economic numbers have a lot of slop in them. The 3rd quarter productivity number was 4.2% - too high. The 4th quarter number was -0.5% - too low. Average those, and the number is just right. Again, it's not a real worry.
We see this is as the normal piddling around. It's what makes a market. These are all relatively small shifts that have been well telegraphed, and promise at most modest moves. It's an excuse to worry, more than an actual worry. There are some real things to worry about, but interest rates are not it at this point.