The ISM non-manufacturing survey missed expectations, dropping four points from August to a reading of 52.6 and well below consensus of 55.3. The service sector is still expanding – a reading above 50 percent indicates the sector is expanding – but the numbers were the lowest since August 2016.

Percentage Point Moves

• NMI Headline 52.6, -3.8
• Business Activity 55.2, -6.3
• New Orders 53.7, -6.6
• Inventories 53.0, -2.0
• Prices 60.0, +1.8
• Employment 50.4, -2.7

 ISM Non-Manufacturing Index

While the report was a disappointment, the market is now cheering for more rate cuts ahead.  Odds are 90% for a rate cut at the end of October, and 50% now for December.  And while this is great for stocks, U.S. Treasury yields have continued to go down with the 10 year now at 1.534% and the 2 year down to 1.386%. 

The market dropped fast on the release of the ISM services/non-manufacturing report but has since had a huge reversal. At the lows:

• Dow down 335 points
• S&P 32 points
• Nasdaq 85 points

Now:

• Dow up 40
• S&P500 up 14
• Nasdaq up 63

FAANG stocks have been hit hard of late, but Facebook (FB) is helping to reversing the trend on the announcement of the camera/messaging app through Instagram.  FB is higher by 2.4%.  Snap (SNAP), however, is getting hit on the news and is down over 5%. 

Factory orders for August were down 0.1%, compared to an increase of 1.4% in July.  Shipments were also lower by 0.1% after dropping 0.3% in July.  Business spending slowed in August once again.