The St. Louis Fed’s Financial Stress Index eased to -1.303 in the week ended Friday, September 6 from -1.266 in the prior week. In spite of some less than stellar economic data in the week, this was the third time in a row that the index showed tensions were easier in financial markets. Some of it was due to another week of stock market gains and improvements in the outlook for trade negotiations with China. The mediocre economic data along with comments from Fed officials kept the probability of another rate cut at the September 17-18 FOMC meeting as a near certainty. Also helpful was that the prior week’s inversion of the 2-year/10-year yield curve turned around narrowly, and that that for the 3-month-10-year was less inverted.
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