Fed Funds Glued to Stocks as September Odds Creep Back From Low

For the last month, odds that policy makers will boost fed funds in September have been tracking fluctuations in the Standard & Poor’s 500 Index, bottoming in the last full week of August then making up as much as a third of the lost ground in the past 10 days. Bets that the Fed will tighten declined as U.S. equities staged their first 10 percent correction in almost four years, losing as much as 12 percent from a record high in May.

While pinning down cause and effect isn’t easy in markets that influence each other as they react to signals on global growth, Bank of America Corp. sees a connection between the performance of stocks and how traders view next week’s meeting. It’s simple: as equities tumble, confidence fades that officials will pull the trigger on their first rate increase since 2006.