This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
US macro-economic data has been on the soft side today, but this has not caused any ructions in the stock market, with the S&P 500 holding close to its all-time high. By early afternoon in New York, the S&P was up 0.1% at 1875.8, just shy of the fresh intraday high of 1876.58 set earlier in the session. The Dow Jones slipped back 0.22% or 35 points to 16,360.6.
Two gauges of the services side of the US economy showed activity slowed last month. Markit’s PMI services index slipped to 53.3 from the 56.7 reading seen in January, the lowest level recorded since the federal government shutdown, while ISM’s non-manufacturing index tumbled to 51.6 from a prior level of 54.0. While both were forecast to drop, the levels released today were still well below expectations. The disappointing results are being attributed to bad weather. While this makes a convenient excuse, I don’t think bad weather is the whole story. Common sense suggests that the severity of this winter's cold weather is likely to have caused the economy some headwind, but it stretches credulity to say that it underlies all and any signs of weakness we are seeing.
ADP’s latest estimate for private payrolls also undershot expectations, coming in at 139,000 for February against the 150,000 that had been forecast. There was also a huge revision to January’s level, slashed from 175,000 to 127,000. The magnitude of that revision speaks volumes about the problem with the ADP report these days – rather than behaving as a predictor of the official data, it often ends up playing catch-up to the government data a month later, having to amend its original estimate to bring them in line.