Stronger-than-expected economic news leaves the CPI on September 13, and the outside possibility of substantial slowing in price inflation, as the only report that would keep the Federal Reserve from raising rates at its September 19-20 meeting.

Lifted by a smaller-than-expected trade deficit, at $65 billion in July and $3 billion below Econoday's consensus, together with a surprisingly solid ISM services index, at 54.5 and nearly 2 points better than the consensus, Econoday's Consensus Divergence Index is at 36 to indicate that US economic data are coming in significantly above forecasts. The last time this index was this high was in late July when, citing the strength of incoming data, the Fed raised rates by 25 basis points. Further underscoring the strength of the economy was the Fed's Beige Book which offered one of the most upbeat assessments in more than a year in what will help ease concerns at the Fed over the risk of recession.

Reflecting the prospect of higher policy rates, the 2-year Treasury yield jumped 7 basis points to 4.94 percent at the same time that stocks sank with the Dow down 0.6 percent and the Nasdaq down 1.1 percent.

Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.

Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.