LIVE MARKETS-Data clearance: Everything must go!

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DATA CLEARANCE: EVERYTHING MUST GO!

Investors were drenched by a data downpour on Wednesday, which offered surprises to the upside and downside. But taken together, the onslaught cemented the likelihood of a Fed cut later this month.

Private employers unexpectedly shed 32,000 jobs last month, according to payrolls processor ADP.

The loss came as a surprise to analysts, who expected a weak 10,000 increase. It also marks an abrupt reversal from October's upwardly adjusted 47,000 gain.

Ordinarily, it would make sense to drop a reminder that ADP is not a reliable predictor of official employment report data, but government data is still being released in fits and starts, and the November jobs report will be a no-show this Friday.

Even so, it speaks to a softening labor market and can only solidify expectations for a rate cut from Powell & Co this month.

Noting that this reading suggests the worst month for private payrolls since early 2023, Jeffery Roach, chief economist at LPL Financial adds "the faltering labor market will be the focus for the Fed at their December meeting."

"I expect the unemployment rate will rise to 4.6% by the end of the year and remain elevated in 2026," Roach adds.

A happier surprise came from the services sector.

The Institute for Supply Management's (ISM) non-manufacturing PMI USNPMI=ECI inched up 0.2 points to 52.4 in November, its second straight month above 50, which is the PMI dividing line between contraction and expansion.

Analysts predicted a slight, 0.3-point deceleration.

A closer gander at the index's subcomponents shows new orders decelerated, while production picked up some steam. Employment, export orders and imports all remained in contraction.

Prices paid - an inflation predictor - backed off October's near three-year high, but remained elevated at 65.4.

While "continued expansion in both the Business Activity and New Orders indexes," bodes well for the sector, according to Steve Miller, Chair of ISM's Services Business Survey Committee, he adds "on the downside, tariffs and the government shutdown continue to be noted by survey respondents as impacting both demand and costs."

For its part, S&P Global's final take on November services PMI USMPSF=ECI, provides a cheerier view of the sector. While its index was revised down from its initial "flash" take released a couple of weeks ago, at 54.1 S&P Global sees the sector expanding faster than ISM does.

Taken together with Monday's manufacturing PMI, S&P Global's composite reading lost some momentum but remained robust at 54.2.

The Federal Reserve's industrial production USIP=ECI news was more mixed (and more long in the tooth), showing a squint-or-you'll-miss-it 0.1% gain.

While that's better than the "unchanged" consensus, it sits in the shadow of a downwardly revised 0.3% drop in the long-ago month of August.

Peeking under the hood, a 2.2% drop in auto production kept the gains muted while utilities and business equipment and high-tech contributed to the upside.

Capacity utilization, a measure of economic slack, repeated the prior month's downwardly revised 75.9% print.

"The broad trend in manufacturing looks stagnant after these—admittedly stale—numbers," says Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, who also notes that "AI-related capex is providing a major tailwind."

Import prices USIMP=ECI - another relic from the distant past - were unchanged in September, according to the Labor Department.

At 0.3% growth year-on-year, import prices (which exclude tariffs) are the coolest U.S. inflation indicator in the business. They are also subject to things like foreign economies and currency exchange rates.

"Falling fuel costs helped balance price increases across other import categories, particularly industrial supplies and materials, which notched the largest monthly gain," writes Grace Zwemmer, associate economist at Oxford Economics.

Financing home loans grew less expensive last week; nevertheless, would-be borrowers, on balance, stayed on the sidelines.

The average 30-year fixed contract rate USMG=ECI cooled down by 8 basis points to land at 6.32%, according to the Mortgage Bankers Association (MBA).

While that prompted a 2.5% increase applications for loans to purchase homes USMGPI=ECI that gain was erased by a 4.4% drop in refi demand, USMGR=ECI which accounted for a decreasing 53.0% share of total mortgage activity.

Combined, total mortgage demand weakened by 1.4%.

"Mortgage rates moved lower in line with Treasury yields, which declined on data showing a weaker labor market and declining consumer confidence," said Joel Kan, MBA’s deputy chief economist.

The 30-year fixed rate is currently 37 basis points to the south of where it sat on the same week last year.

Purchase and refi demand have risen by 15.2% and 109.0% over the same time period.

(Stephen Culp)

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