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Major indexes pushed higher Thursday as bank and gold shares advanced. But gains were modest as investors were disappointed that the service sector didn't move into expansion mode.
The ISM reported its service-sector index rose to 48.4in August from 46.4 in July, slightly beating expectations but still at the 50 mark, which would indicate expansion in the sector.
After the ISM's manufacturing gauge topped the 50 mark, some analysts were expecting the services index to cross that milestone. When it didn't, stocks sold off but then tried to claw higher.
The last time the services gauge was at 50 was September 2008.
"While clearly signaling economic conditions that are nowhere near as bad as late last year ... we do not expect this [service-sector] indicator to flash a sustained “all-clear” signal anytime soon," Joshua Shapiro, chief U.S. economist at MFR Inc., wrote in a note to clients. "Indeed, the less impressive recovery in this index compared to the ISM manufacturing index underscores the inventory-led nature of the current economic bounce."
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