LIVE MARKETS-Hump day indicators: ADP, services PMI, mortgage demand

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HUMP DAY INDICATORS: ADP, SERVICES PMI, MORTGAGE DEMAND

Investors were treated to a short break from the fog of war uncertainties on Wednesday in the form of generally better-than-expected economic data.

First, the private sector unexpectedly added 63,000 jobs in February, or 13,000 more than analysts expected, which is nice.

But ADP's National Employment index USADP=ECI follows a sharp downward revision of January's number, which was slashed in half to 11,000 from 22,000.

While the report printed in the vicinity of the private payrolls increase of 65,000 economists predict the Labor Department's more comprehensive jobs report to show on Friday, ADP has a sketchy track record as a predictor of official government data.

The data supported "a continuation of the upward trend in job growth since the end of last year," writes Matthew Martin, senior economist at Oxford Economics. "An emerging risk is whether heightened policy uncertainty from geopolitical events and tariff changes undermine business confidence and reduces hiring intentions."

The graphic below tracks ADP's NEI and measures its accuracy (or lack thereof) relative to Labor Department data.

Turning to the services sector, the Institute for Supply Management's (ISM) non-manufacturing PMI USNPMI=ECI unexpectedly added 2.3 points to print at a robust 56.1, accelerating further into expansion territory (or, in PMI-speak, above 50).

Analysts predicted a slight deceleration to a still-expansive 53.5.

A closer gander at the index's subcomponents shows a 5.5-point improvement in new orders. Employment gathered strength while inventories, imports and export orders pole-vaulted into expansion.

Prices paid - an inflation predictor - cooled down to a still-elevated 63.0.

"The services sector is heating up, with the Business Activity, New Orders, and New Export Orders indexes at their highest levels since 2024," says Steve Miller, chair of ISM's Services Business Survey Committee, who added that while "commentary on trade uncertainty increased ... there was no alarm regarding supply chain performance, suggesting that services companies have developed capabilities to routinely address shifts in tariff policies."

Indeed, comments from survey participants were rife with tariff jitters, but were counterbalanced by remarks characterizing business conditions as "solid."

Here's a view of select services PMI components.

For its part, S&P Global's final take on February services PMI USMPSF=ECI, paints a slightly less rosy picture, shedding 0.6 points from its initial "Flash" take to land at 51.7, marking a full-point drop from January's final number.

Taken together with Monday's manufacturing PMI, S&P Global's composite reading edged down to 51.7.

The report reflects "increasingly tough trading conditions for businesses so far this year," says Chris Williamson, chief business economist at S&P Global. "Slowing demand growth from customers both at home and across export markets has been compounded by adverse weather in many states, resulting in the smallest rise in service sector activity for ten months."

S&P Global and ISM indexes differ in the weight applied to their various components.

This shows the extent to which the dueling PMIs agree (or not):

Finally, while the cost of financing home loans held firm last week, borrower applications surged, according to the Mortgage Bankers Association (MBA).

The average 30-year fixed contract rate USMG=ECI remained at 6.09%.

That was enough to provoke a 6.1% increase in applications for loans to purchase homes USMGPI=ECI and a more sizeable 14.3% jump in refi demand USMGR=ECI which accounted for 59.8% of total mortgage activity.

Combined, total mortgage demand grew by 11%.

"Mortgage applications increased last week, driven by continued strength in refinance activity, as mortgage rates stayed near their lowest level since 2022,” says Joel Kan, MBA’s deputy chief economist.

The 30-year fixed rate currently sits 64 basis points above where it was a year ago.

Purchase and refi demand have risen by 10.0% and 108.8% over the same time period.

(Stephen Culp)

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(Stephen Culp)

((stephen.culp@thomsonreuters.com))