January's ISM Services PMI Surpasses Projections, Reaching 53.4

The services industry has experienced growth in 43 out of the past 44 months.  

Highlights

•  In January, the ISM Services PMI surged from 50.6, surpassing December's figure to reach 53.4.
• The New Orders Index saw an enhancement from 52.8 to 55, reflecting improved performance between December and January.
• The S&P Global Services PMI rose from 51.4 in December to 52.5 in January, demonstrating an increase in performance over the month.  

On February 5, 2024, the Institute for Supply Management released the ISM Services PMI report, revealing an improvement from 50.6 in December to 53.4 in January, surpassing the analyst consensus of 52. This figure indicates growth when exceeding 50 and marks the 13th consecutive month of expansion in the services sector.

The New Orders Index saw an increase from 52.8 in December to 55 in January, while the Employment Index improved from 43.8 to 50.5.

According to the Institute for Supply Management, the overall growth rate in January was driven by the faster growth of the New Orders, Employment, and Supplier Deliveries indexes, with a majority of respondents indicating steady business.

Additionally, the final reading of the S&P Global Services PMI report for January showed an increase from 51.4 to 52.5, contrasting with the analyst consensus of 52.9. The Composite PMI also improved from 50.9 to 52.

Following the release of the better-than-expected ISM Services PMI report, the U.S. Dollar Index tested new highs and is currently attempting to settle above the 104.50 level. Traders are focusing on rising Treasury yields and preparing for a potentially more hawkish Federal Reserve.

As for gold, it tested support at $2015 – $2025 as traders reacted to the combination of rising Treasury yields and a stronger dollar. The recent U.S. reports depicting the economy in a strong position may lead the Fed to consider leaving the federal funds rate unchanged at the next meeting, a scenario that is bearish for gold and other interest non-yielding precious metals.

In response to the strong Services PMI report, the S&P 500 experienced a pullback, with traders concerned that robust economic data could prompt the Fed to maintain current interest rates in the near term.