Stocks Close Mixed; Service Sector Under Pressure
US stocks surged on Tuesday and held steady at the open on Wednesday. Upward momentum is strong as investors continue to point to the weather as the catalyst that has led to disappointing economic data for January and February. ADP reported that private payroll data came in softer than expected, while the Institute of Supply Management reported a subdued services report. The major indices closed mixed with the Nasdaq the only average notching up gains.
Private sector employment, reported by Automatic Data Processing and Macro Economic Advisors, increased by 139,000 jobs in February according to Wednesday’s National Employment Report. This compared to the 152,000 expected by economists. January’s reported showed that private jobs created in the first month of the year were revised lower by 48,000 jobs. Service-providing industries added 120,000 jobs in February, up from a downwardly-revised January figure of 116,000. The ADP National Employment Report indicates that professional business services contributed the most to growth in service-providing industries, adding 33,000 jobs.
Stocks were somewhat buoyed by China announcing that it has kept its annual GDP growth target at 7.5% for 2014, allaying the concerns of some analysts. The Eurozone also reported stronger than expected number with their services PMI printing at 52.6 in February from 51.6 in January, while composite output rose to 53.3 from 52.9. The data suggests that euro-zone GDP is on track to grow 0.4-0.5% in Q1.
U.S. service-sector expanded in February at a sharply slower pace driven by inclement weather. The Institute for Supply Management said its non-manufacturing index dropped to 51.6% last month from 54% in January. That was well below the 53% forecast of economists surveyed. The employment gauge tumbled nearly 9 points to 47.5%, marking the lowest level since March 2010 as severe weather hindered hiring in some sectors such as construction and wholesale trade. The ISM’s new-orders index edged up to 51.3% from 50.9%, while production slid 1.7 points to 54.6%.
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