IXIC: Nasdaq Composite Washes Out 0.7% as Weak Services Data Jolts Investor Confidence

First it was the jobs data that rattled confidence. Then the firing of the messenger. And now the ISM Services slipped below consensus.

📉 Services Sector Just Flatlined

• The Nasdaq Composite index IXIC sank 0.7% on Tuesday after another batch of key economic data jolted the already fragile investor confidence. The S&P 500 fell 0.5%, and the Dow clipped 0.1% — the three spent most of the cash session trading sideways.
• Following a hugely problematic jobs report paired with two hugely revised months and the firing of the BLS chief, weak services data piled onto a nervous market. It was all happening as traders were weighing the risk of a slowdown without much inflation relief — aka, stagflation.
• The ISM Services Index — a key read on America’s biggest economic sector — dropped to 50.1 in July, barely clinging to expansion territory (50 is the line that shouldn’t be crossed). Economists were expecting 51.5, so this was a cold cup of joe for anyone optimistic.

🔄 Rebound Monday, Reality Check Tuesday

• Tuesday’s selloff followed a wild swing: Friday’s NFP report tanked the Dow by more than 500 points, only for it to rebound nearly 600 points on Monday on rate-cut hopes.
• But weak services data poured cold water on that enthusiasm, reminding traders that economic weakness might not be the rally catalyst they hoped for.
• The Services sector makes up about 70% of the US economy. When that engine sputters, the whole car starts to rattle — and the market doesn’t like that sound.

✂️ Rate Cut to the Rescue?

• Traders are now more convinced that the Fed will cut in September, aiming to ward off a recession rather than stoke a new boom.
• However, don’t count on aggressive easing — the Fed doesn’t want to pour gasoline on sticky inflation, even if the economy starts to limp.
• Bottom line? Cuts are most likely coming — is that happening in September? That’s what’s getting priced in right now, and the recent chop shows it.