Services Sector Data
The ISM services business activity index came in at 54.9, slightly below the 55.1 the market expected. A reading above 50 means expansion, so the sector is still growing. The prices paid component hit exactly 74, up from 72.6 the prior month. That is the highest price level since July 2022, so prices keep climbing. New orders fell to 59.8 from 60.9 last month. Employment was 50.1, just above the expansion line. Most of the report matched expectations, though the underlying numbers were a bit weaker.
The S&P Global services index read 58.8 after a revision. Its price part again rose fast, but new orders, especially export orders, improved over time - a bright spot and a small change from before.
The 74 prices reading is worth watching. High input prices could turn into price increases later that get passed on to consumers. Overall the services sector showed good performance, and stocks tried to push higher after the report. The S&P moved to test the 7740 level.
Oil, Diesel, and the Bond Market
The link between oil prices and bond yields has clearly broken. Some connection likely remains, but the market now watches the dollar and its tie to yields. As the dollar rises, bond yields follow it up. That is part of why the major stock indexes held, helped by a resilient technology sector.
Over the weekend, strikes hit tankers, raising worry about escalation near the Bab el-Mandeb Strait off Yemen. Reports that a Saudi Aramco facility was hit were true, but the specific power plant was not damaged by those strikes. Oil traded around $90. The $87-88 range was key support, and some buyers stepped in there.
Spreads on petroleum products are easing. Crude got a bit cheaper, and by-products like diesel dropped sharply in relative terms. Diesel is up 1% today, trading around $4.54 - the key ingredient behind those spreads.
Bond yields are trading largely on their own right now. The big event this week, despite thin economic data, is the 10-year Treasury auction on Wednesday. The recent 5-year auction was very weak, which may signal rising weakness from foreign buyers. That could push yields to either peak at current levels or keep rising.
Market Levels and Flows
Economic data is light this week. Services PMIs are already out, few top-tier earnings reports are due, and the FOMC meeting minutes come later in the week, though they may hold no surprises.
On an intraday basis, the target is up to 7760. Heavy call option activity showed up on SPX this morning, usually an optimistic signal for the market. Holding above 7730 should act as a psychological level for many technical traders. A drop points to 7680.
For the week, if the bullish flag pattern breaks out further, the S&P 500 (SPX) could reach roughly 7800-7820 - a new record high. One fuel for this is the low number of stocks currently above their 50-day moving average, which already sits somewhat in correction zone.
Some sectors show positive flows this morning, such as consumer goods. Tesla (TSLA) is rising strongly. Amazon (AMZN) is trying to firm up and break through its 20-day moving average. Lagging sectors outside of tech, more than the tech companies themselves, could drive the move to historic highs.
Market depth has deteriorated sharply, so the advance leans on a small number of stocks. The next catalyst will be earnings reports.
