The Dow and S&P 500 have had such a sorry run over the summer that the small sequence of gains we have seen in recent days means both indices are on course for their best week in nigh on two months.
Stocks were boosted by data from the Institute of Supply Management showing the US services sector grew at its fastest pace for more than seven years in August. The ISM non-manufacturing index rose to 58.6, the highest reading seen since all the way back in December 2005, up substantially from July’s already-strong level of 56.0. Not only did the reading beat the consensus estimate of analysts, it topped the highest forecasts given in a survey conducted by Econoday.
The surprising strength of this report suggest that the pace of economic growth may be set to pick up in the second half of the year, although this view is slightly tempered by a 2.4% drop in factory orders in July. This was actually better than expected, with forecasts pointing to a 3.4% decline, and once the volatile transportation component was stripped out, new orders were up 1.2%, meaning the headline figure sounds worse than the reality of the situation.
Tomorrow the focus will be on the US government’s monthly employment report. Non-farm payrolls is expected to rise by 175,000 and the unemployment rate is expected to remain unchanged at 7.4%. Any big divergences from these numbers could lead to volatility, so stay sharp around 1.30pm BST when the report is released!