A surge in the December ISM Services Index, a measure of US service sector activity, fueled concerns about persistent inflation. The index jumped to 64.4%, its highest level since January 2024, raising fears of an unwelcome upward trend in inflation. The report comes as the US Treasury yields rose to their highest levels since April, and investors scaled back expectations for a rate cut by the Federal Reserve in January.
This report is from today's CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribeto"restore free expression" and move to a"Community Notes" model, similar to the system on Elon Musk's platform X. Employees took to their internal forum andafter a tepid debt auction fueled worries over demand.
The price index for December's ISM report jumped to 64.4% from 58.2% in November, representing a rise of more than 10%. It's the first time since January 2024 the reading has come in above 60%, noted Steve Miller, chair of ISM's Business Survey Committee. That might only be the start of an unwelcome upward trend. Miller attributes some of the expansion in service activity to"risk management for impacts from ports strikes and potential tariffs" — both of which generate inflationary pressures.to 4.699% during the U.S. trading day, the highest level since April 26. They also dialed down their expectations for a 25 basis points rate cut at the U.S. Federal Reserve's January meeting, pricing in a 4.
But the strong ISM report also suggests the U.S. economy's still doing well, which provides fertile ground for profit growth, said Hainlin. And as David Lefkowitz, CIO head of US equities for UBS, wrote in a Monday note,"profit growth matters more" than valuation for returns over the next 12 months. One data point from one measure of inflation doesn't chart out the path of inflation or corporate health for the year ahead. But it pays to be prudent to tread carefully for now.
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