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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.