S&P 500 Presses Record Levels After Stunning Service Sector Data
- ISM non-manufacturing read in at 61.6 versus the forecasted 58 and last month’s 58.5
- The data contradicts the slight miss in ISM manufacturing data released Monday
- Services data coupled with strong employment figures sent the S&P 500 and Dow higher
September’s Institute for Supply Management non-manufacturing index crossed the wires Wednesday and surpassed all expectations. The data revealed the service industry expanded at the quickest pace on record, as the composite reached the highest level since the survey’s inception. The overall index read 61.6, above the forecasted 58 and last month’s 58.5. September’s data marked the 110th consecutive month of growth in the service sector industry.
A more detailed look at the index revealed the index’s increase was not isolated to a specific area but came from broad sector strength. Business activity offered a robust 4.5% increase from August, climbing to 65.2. Similarly, both the new orders and prices index climbed over 1%, resulting in 61.6 and 62.8 readings respectively. The employment section offered a drastic 5.7% bump from August, falling in-line with Wednesday’s ADP data surprise. The ADP report recorded 230,000 private sector payrolls were added last month versus the forecasted 185,000.
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Although the report was overwhelmingly positive, there were some areas highlighted for concern. Capacity, logistics, and trade were among them but were not enough to halt robust gains in other areas. “The non-manufacturing sector has had two consecutive months of strong growth since the 'cooling off' in July. Overall, respondents remain positive about business conditions and the current and future economy," said ISM Chair Anthony Nieves. However, "concerns remain about capacity, logistics and the uncertainty with global trade,” he concluded.
As the service industry comprises roughly 75% of United States GDP, market response to the data was notable. Coupled with the strong employment data from ADP, the non-manufacturing index pushed the S&P 500 to near record levels. Similarly the Dow pressed to new heights, marking yet another day when the industrial average notched a new record.
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S&P 500 Price Chart Hourly, October
At the time of this article’s release, the S&P 500 retraced some of the gains initially posted due to the data. Still, service industry figures will weigh on investor and consumer confidence as the fourth quarter progresses.
Dow Jones Price Chart Hourly, October
For the Dow, the data release bolstered the initially bearish index which regained ground and pressed higher. Since then, the direct impact of the release has waned and traders now look to the next important events on the economic calendar to influence their trading.
--Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
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