Last week, the market told us exactly why we should stay short as the jobs report and personal-consumption-expenditures (PCE) index both showed growth. This morning we saw a continuation of this trend as the Services ISM surprised analysts to the upside, delivering a 56.5 reading versus an expected 53.5.
The ISM is a gauge of U.S. business conditions at companies such as restaurants and banks, and a rising value signals the economy is still expanding. Any number over 50% shows the economy is expanding, but a reading over 55%, like we got this morning, is above historical averages.
Strength of ISM employment was also up from 49.1 to 51.5 month over month, following last week's employment numbers from ADP.
While there was a slowdown in new orders (56 vs 56.5) and backlogs of orders from the previous month, the decline was negligible.