"The tension is fairly evident," Aaron Kohli, a fixed-income director for BMO Capital Markets, said in an interview. "You've got the Fed that's trying very hard to keep some of the hikes this year on the table, and you've got a market that is pricing in just one hike. There are quite a few investors who believe the Fed may be cutting soon. That dichotomy certainly has widened quite a bit."

The statement, however, stopped well short of indicating that Fed officials might change course from the multiple rate hikes in 2016 forecast in December's summary of economic projections. The result appears to be a somewhat confused climate among investors, evidenced by Wednesday's sell-off and Thursday's choppy back-and-forth trading climate .

Analysts and economists largely viewed the Federal Open Market Committee's post-meeting statement Wednesday as dovish, fueled by nods toward market volatility and expressions of concern that long-awaited signs of inflation remain elusive.

But the new-found tether Wall Street has with oil and the increasingly ambiguous commitment the Fed has to backstopping the market has challenged that notion.

For seven years, the pervasive Wall Street belief was that whatever was wrong with the markets, the Fed could fix it.

The uneasy marriage between financial markets and the Federal Reserve finally may be on the rocks.

Investors have been worried about deflation and contagion from a plunge in energy prices. The sector's fourth-quarter earnings are likely to show a 73.5 percent decline from the same period a year ago, dragging down the outlook for profits to a decline of 6.3 percent, according to S&P Capital IQ estimates.

Economically, the numbers have been a mixed bag. Jobs and housing both are improving a steady clip, but manufacturing is contracting and Thursday's headline durable goods report showed a stunning decline of 5.1 percent, against Wall Street estimates of a 0.3 percent drop.

The Fed statement acknowledged some trouble spots and importantly removed the term "balanced" to describe risks to its forecasts.

"The Fed did seem to acquiesce a little in the statement. They were certainly on the dovish side of what they could have said," Kohli said. "But definitely the market's view on where the data are headed and the Fed's view really are diametrically opposed."

Since the Fed cut its interest rate target to near-zero and began quantitative easing in late 2008, any disputes between the Fed and the markets have favored the latter. Each time since the financial crisis that the market has swooned, the Fed has stepped in with stimulus, or a "put," as some in the market have called it.

With stocks currently in correction — January is tracking as the third-worst month ever for the S&P 500 — and benchmark bond yields heading lower despite the Fed's quarter-point rate hike, there indeed has been speculation the FOMC may reverse course.

Don't bet on it, said Nicholas Colas, chief market strategist at Convergex. Colas believes that, if nothing else, Fed Chair Janet Yellen will want it known that the central bank began normalization of monetary policy on her watch. Fed critics, and some high-ranking officials within the organization for that matter, have worried over excessive risk taking that Fed policies have helped promulgate.

Yellen "has exactly two years left in that position before the next president has a chance to consider reappointing her or choosing a new person to fill the slot," Colas said in a note.



"In retrospect, every Fed chair has their emblematic 'achievement': Paul Volcker (tamed inflation), Alan Greenspan (the '90s expansion), Ben Bernanke (saved the financial system)," he added. "For Janet Yellen, her prospective accomplishment must be 'got things back to normal.' That means getting interest rates far away from the zero lower bound if at all possible. If for this reason, and no other, the Fed is going to raise rates in 2016 barring a shock to the system."



How willingly the Fed will be to buck the market is going to be key point for investors. They'll get better clues in the coming days, with Yellen set to give her semiannual congressional testimony next week and a slew of other Fed speakers scheduled in the days ahead.

Traders on Thursday were pricing in just a 12 percent change of a rate hike in March, a level that dropped precipitously from the 24 percent probability just a day ago, according to the CME's FedWatch tool. The most likely scenario is just one hike, in November or December.

If nothing else, March's meeting will give Fed officials a chance to show how willing they are to dig in their heels on policy normalization and rate hikes. Or they could show that the marriage is back on and the U.S. central bank is as beholden to market moves as ever.