The ISM Services PMI Report Indicates Robust Expansion in the Services Sector.

The report, surpassing analysts' expectations by a significant margin, could offer further reinforcement to the U.S. dollar.

Highlights

• The ISM Services PMI experienced an improvement, rising from 52.7 in July to 54.5 in August.
• The New Orders Index showed an increase, climbing from 55.0 to 57.5.
• The Business Activity Index demonstrated growth, expanding from 57.1 to 57.3.

On September 6, the Institute for Supply Management (ISM) released the ISM Services PMI report for August. The report showed that the ISM Services PMI increased from 52.7 in July to 54.5 in August, surpassing analysts' consensus of 52.5. A reading above 50 indicates expansion, and the index has now been in expansion territory for eight consecutive months.

The New Orders Index improved from 55.0 in July to 57.5 in August, while the Business Activity Index increased from 57.1 to 57.3.

According to the ISM, the rate of growth in the services sector has increased, as evidenced by improvements in all four subindexes that contribute to the composite Services PMI, as well as faster supplier deliveries.

In addition, the final reading of the S&P Global Services PMI report was released, showing a decline from 52.3 in July to 50.5 in August, below analysts' consensus of 51.

The ISM report significantly exceeded analyst expectations, which was surprising following yesterday's weak Services PMI reports from various countries.

The release of the report had an impact on the financial markets. The U.S. Dollar Index tested the 105.00 level, benefiting from the better-than-expected report and increasing the chances of a more hawkish Federal Reserve due to the strong performance of the services sector.

Gold prices declined towards the $1920 level due to a stronger dollar and rising Treasury yields. The yield of 2-year Treasuries surpassed the 5.00% level, which negatively affected precious metals markets.

The S&P 500 index tested session lows near the 4470 level as traders reacted to the report. Rising Treasury yields exerted downward pressure on major stock indices. The positive ISM report had a bearish impact on stocks, as the outlook for Federal Reserve policy remains a key driver for equity markets. Traders sold stocks due to concerns of a potentially more hawkish stance from the Fed compared to previous expectations.