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Yesterday’s disappointing Purchasing Managers Index news on U.S. manufacturing has put two interest rate cuts from the Federal Reserve back on Wall Street’s expectations.(Economists had expected that the PMI number for September would show the manufacturing sector moving back into expansion territory. Instead the sector moved deeper into contraction.)

According to the CME Fed Watch Tool, the odds of an interest rate cut at the Fed’s October 30 meeting have moved up to 77% today from 62% yesterday from 54.6% on August 30. (The tool calculates odds of a move by the Federal Reserve by looking at prices in the Fed Funds Futures market.) This new reading moves the odds above the 65% level that according to my rule of thumb indicates that the U.S. central bank is almost certain to move.  Unless Fed officials begin to talk down an interest rate change almost immediately after odds reach this level.

The market continues to belief that the Fed will cut interest rates at its December meeting.

It’s clear that financial markets have been spooked by yesterday’s manufacturing disappointment–and continued disappointing news today on auto sales and in the private ADP job report.

For the market to say spooked, it will have to see some weakness in what is expected to be a very strong Purchasing Managers Index for the service sector tomorrow and a disappointing report on jobs growth in September from Friday’s official government report.

Economists surveyed by are expecting that the U.S. economy added a relatively weak 150,000 jobs in September. That would be up, however, for the very weak 130,000 jobs added in August. Economists also expect that the services index will dip slightly to 55.4 in September from 56.4 in August. That would still leave the sector solidly in expansion territory above 50.