Business confidence in the U.S. services sector expanded much more rapidly than expected in May, reversing a downward trend that began in April.
what happenedAfter 15 straight months of expansion, business earnings, a measure of activity in the services sector, temporarily contracted in April but returned to a stronger pace of growth in May, according to data released Wednesday by the Institute for Supply Management.
ISM Services PMI Report for May: Key Highlights
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According to Econoday, the overall ISM services sector PMI rose to 53.8%, up 4.4 percentage points from April's 51.4% and above expectations of 50.8%.
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The business activity sub-index rose to 61.2% in May, up from 50.9% in April, representing a significant increase of 10.3 percentage points.
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The new orders sub-index continued its expansion for the 17th consecutive month, rising to 54.1% in May from 52.2% in April.
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The price paid sub-index decreased from 59.2% to 58.1%, indicating a slight improvement in the price pressure trends felt by service providers.
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The employment sub-index fell for the fifth time in six months, but at a slower pace than in April.
Anthony Nieves“The increase in the composite index in May was the result of a marked increase in business activity, faster growth in new orders and slower supplier deliveries, despite a continuing contraction in employment,” the chairman of the Supply Chain Management and Services Committee said in a statement.
Survey respondents reported that overall business is on the rise, although growth rates vary by company and industry. Employment issues persist, primarily due to difficulties in filling positions and controlling labor costs. The majority of respondents believe that inflation and interest rates are preventing the business environment from improving.
Market reaction: Stocks hold up gains, bond yields rise again
US stocks were able to largely hold onto their gains during the session following a better-than-expected ISM services PMI report, despite bond yields rising again.
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The S&P 500 index is SPDR S&P 500 ETF Trust (NYSE:SPY) was up 0.2% as of 10:15 a.m. New York time.
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Technology Focus Invesco QQQ Trust (NASDAQ:QQQ) outperformed, rising 0.8%.
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Blue Chip SPDR Dow Jones Industrial Average ETF (NYSE:DIA) fell 0.2%.
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Long-term Treasury yields rose about 2 basis points, and the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) fell 0.3%.
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The US dollar rose, Invesco DB USD Index Bullish Fund (NYSE:UUP), up 0.5%.
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Money is SPDR Gold Trust (NYSE:GLD) rose 0.4%, but gains were pared down by a stronger dollar.
Read now: 152,000 New Jobs Added in May, Below Expectations: 'Notable Weaknesses'
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The article, “Services Sector Activity Expands Significantly in May: Notable Increase in Business Activity, Rapid Increase in New Orders” originally appeared on Benzinga.com.
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