Judging by this morning’s update of the ISM services industry index for October, the economy doesn’t look all that bad. But there are an infinite number of ways to judge the economic outlook and it appears that for the moment more investors are inclined to judge the glass as half empty rather than half full.
The stock market certainly found no reason to cheer in the wake of today’s ISM news. Yes, services now dominate the U.S. economy compared with the diminishing role of manufacturing. In fact, the October rise in the ISM services index exceeded expectations as upward momentum in the sector took root last month, as the chart below shows. “The [ISM services index] numbers are pretty good,” David Sloan, an economist at 4Cast Ltd., told Reuters. “It suggests the service sector is growing at a decent pace so the economy is not in too much trouble overall, at least for the moment, despite the weakness in housing.”
As such, one might think that a favorable reading for the index would dispense a bit of optimism. Not today, at least not as we write at roughly halfway through Monday’s trading in New York. U.S. stocks opened sharply lower this morning, although the losses were pared by noon.