Stocks dip again in weak start to 2014

A disappointing level of growth in the US non-manufacturing sector for December has prompted an air of caution on Wall Street today, pushing indices and the dollar lower.

The Institute of Supply Management (ISM) reported today that its survey of non-manufacturing firms declined for a second successive month in December, sliding to 53.0 from November’s reading of 53.9.

This was below the consensus forecast of analysts polled by Bloomberg, who had predicted a rise to 54.7. Perhaps most noteworthy in the data was the low level for new orders, which fell below 50 for the first time since the summer of 2009. The employment component showed strength with a reading of 55.8, which could lift hopes for Friday’s payrolls data, but overall this is a slightly discouraging result, pointing to growth in the US economy starting to slow down.

There was another positive sign for the manufacturing sector though, with the Commerce Department reporting that the dollar value of factory orders increased 1.8% in November, while the October value was upwardly revised from -0.9% to -0.5%. This confirms that manufacturing is a currently a bright spot for the economy.

Perhaps because the non-manufacturing report is more timely, and perhaps because manufacturing strength has already been priced in to a large degree, the market was more swayed by the downbeat data and by early afternoon in New York the Dow Jones was down by 0.22% or 37 points at 16,432.

The dollar was also hindered by the surprise fall in the ISM non-manufacturing report, losing ground against many major currencies. EUR/USD rose 0.43% to 1.3647, while the dollar fell 0.75% against the Japanese yen.

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