LIVE MARKETS-Hump day data: ADP, services PMI, trade balance, mortgages

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HUMP DAY DATA: ADP, SERVICES PMI, TRADE BALANCE, MORTGAGES

A quintet of indicators on Wednesday gave investors plenty to chew on.

Private employers increased their headcount by 183,000 in January, according to payrolls processor ADP's National Employment index USADP=ECI.

The number marks a 4% increase from December, and nearly 30% higher than the 141,000 private payrolls increase analysts expect from the Labor Department this Friday.

ADP has a sketchy track record as a predictor of the official data.

"Think twice before you recalibrate your estimates for Friday's payroll figures," writes Carl Weinberg, chief economist at High Frequency Economics. "We use ADP only to gauge the big picture. Right now, that picture is one of still substantial increases in jobs by a fast-growing economy but a slowing trend in job creation."

The chart below gauges ADP's agreement with the Labor Department's private payrolls metric:

Next, the U.S. services sector unexpectedly lost some velocity last month.

Institute for Supply Management's (ISM) non-manufacturing purchasing managers' index (PMI) USNPMI=ECI slipped 1.3 points to 52.8 in defiance of the slight acceleration to 54.3 predicted by economists.

A PMI reading above 50 indicates monthly expansion

Digging below the headline, new orders lost momentum but employment improved and prices paid - an advance inflation indicator - cooled.

"The latest decline in new orders takes that component to a seven-month low and suggests that worries about immigration and trade policy under the new administration are overriding any optimism that businesses might have about the prospect of tax cuts or deregulation," says Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.

S&P Global also released its final services PMI number, which landed at 52.9, just a hair above its initial "flash" take of 52.8.

"The survey also recorded signs of softer demand conditions, notably where demand is heavily influenced by changing interest rate expectations, such as financial services," writes Chris Williamson, chief business economist at S&P Global.

"Business optimism has also cooled slightly ... reflecting some pull-back in the buoyant post-election optimism seen in December."

S&P Global and ISM PMI indexes differ in the weight they apply to various components (new orders, employment, etc.).

Turning to international trade, the difference between the value of goods and services imported to the United States and those exported abroad USTBAL=ECI widened by 24.7% in December to $98.4 billion.

Looking closer, exports fell 2.6% while imports increased by 3.5%.

Here's a look at U.S. imports from China, Mexico and Canada, three nations recently threatened with tariffs (25% tariffs against Mexico and Canada were given a one-month reprieve, while a 10% tariff on China went into effect on Tuesday, prompting retaliatory actions).

The cost of financing home loans dipped below 7% last week according to the Mortgage Bankers Association (MBA).

The average 30-year fixed contract rate USMG=ECI shed 5 basis points to 6.97%.

The dip failed to impress would-be homebuyers. Applications for loans to purchase homes USMGPI=ECI decreased by 3.5%.

But that was offset by a 12.2% jump in refi demand USMGR=ECI, which put net mortgage demand up by 2.2%.

Noting that refinancing "had their strongest week since December 2024," MBA's deputy chief economist added "purchase activity had a tougher week, with declines across all loan types."

The 30-year fixed rate is now 18 basis points warmer compared with the same week last year.

Over the same time period, purchase and refi demand have risen by 2.1% and 16.8%, respectively.

(Stephen Culp)

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