Wall Street’s two-day rally lost momentum Wednesday as investors reassessed the economic outlook after weak job numbers and a surprise contraction in the U.S. services sector cast fresh doubt over the strength of the economy.
By midday in New York, the S&P 500 hovered flat around 5,970, the Nasdaq 100 edged 0.2% higher and the Russell 2000 of small caps slipped 0.2%, reflecting investor caution after consecutive sessions of gains.
The Institute for Supply Management’s Services Purchasing Managers Index fell to 49.9 in May, down from 51.6 in April. It marked the first contraction since December and the weakest reading since June 2024, sharply missing consensus forecasts of 52%.
A reading below 50 signals contraction, and the drop raised questions about demand in a sector that represents nearly 80% of U.S. economic output. Adding to inflation concerns, the subindex tracking prices paid by service providers jumped to its highest since November 2022, hinting that firms are again facing rising input costs.
Private employers added just 37,000 jobs in May, well below …