On Wednesday, ISM pleased market participants with data from the service sector. Business activity accelerated growth to 58.7 in January from 57.7 in December last year, beating the market forecast of 56.8. The numbers point to the strongest growth in the services sector since February 2019. New orders showed the best dynamics (61.8 versus 58.6), and employment returned to growth after contraction (55.2 versus 48.7). On the other hand, production slowed down a bit (59.9 versus 60.5) and new export orders decreased (47 versus 57.3). Inflation in the sector remains high (64.2 vs. 64.4).
The Supply Management Institute’s comments indicate that the respondents are more optimistic about the business environment and the economy than a month ago. Various local and national COVID-19 restrictions continue to negatively impact companies and industries. Problems with manufacturing capacity and logistics continue to cause problems in the supply chain.
The market took the information positively. The US 10-year debt securities yield showed an immediate increase to 30 basis points to 1.40%. The dollar continued its upward correction.
Despite the rise in inflationary expectations, the 2-year bonds yield remains depressed. The indicators are near the December lows. Options to change the rates of the Fed still assume a small probability of further decline, completely excluding an increase until the end of the year. This moment is a bullish factor for the stock market, which continues to consolidate near its historic highs. Gold fell again to January lows ($1820) per troy ounce.
Main market quotes:
- S&P 500 (F) 3,821.62 -1.98 (-0.05%)
- Dow Jones 30,723.60 +36.12 (+0.12%)
- DAX 13,963.90 +30.27 (+0.22%)
- FTSE 100 6,522.55 +14.73 (+0.23%)
- USD Index 91.338 +0.236 (+0.26%)
Important events:
- UK Construction PMI (Jan) at 11:30 (GMT+2);
- Bank of England Interest Rate Decision (Feb) at 14:00 (GMT+2).
