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Stronger Services Readings and Higher Input Costs Cool Hopes of a December Fed Cut

Investors trimmed rate‑cut expectations after private surveys pointed to firm demand alongside stubborn cost pressures.

Overview

  • The ISM non-manufacturing PMI rose to 52.4 in October as new orders strengthened to 56.2, while prices paid hit 70.0 and the employment index remained in contraction at 48.2.
  • ADP reported a 42,000 increase in private payrolls, offering a rare jobs signal during the federal data blackout from the prolonged shutdown, which the CBO says could shave 1.0–2.0 percentage points from fourth-quarter GDP.
  • U.S. Treasury yields moved higher and traders reduced the odds of a December Federal Reserve rate cut after the stronger services and prices readings.
  • The U.S. Supreme Court heard arguments over the legality of sweeping tariffs, with a ruling expected next year that leaves current duties in place and trade-policy uncertainty unresolved.
  • Global services PMIs showed broad resilience, with the UK and Japan strengthening, Canada returning to slight expansion at 50.5, and India easing to a still-solid 58.9.