As inflation figures shape market expectations, attention is increasingly shifting toward indicators of economic activity.
Early in the trading session, the index compiled by the ISM Purchasing Managers’ Association revealed a notable uptick in growth within the services sector. This positive economic activity data may appear at odds with the prevailing narrative suggesting that the current economic slowdown warrants a reduction in interest rates.
According to the CME Group’s FedWatch barometer, traders currently estimate a nearly 66% chance of a 25 basis point rate cut next month, while the likelihood of a more substantial 50 basis point easing stands at 34%.
Investor sentiment remains cautious, as evidenced by the majority of S&P sector indices—eight out of eleven—trending downward. However, the energy sector defies this trend, showing a robust increase of 1.1% in response to rising oil prices, which have surged nearly 4% amid fears of supply shortages due to escalating tensions in the Middle East.
The recent bombing by Israel of a Russian military base in Syria has further complicated the geopolitical landscape, increasing concerns about a potential escalation of conflict—an outcome that Washington is keen to avert.