The U.S. services sector's economic momentum is firing at all cylinders, with business activity in October reaching its strongest level in over two years.

According to the Institute for Supply Management, the Services PMI surged to 56% in October 2024, up from 54.9% in September, defying expectations of a dip to 53.8%.

This result marks the fastest pace of expansion in the U.S. services sector since August 2022. The ISM Services PMI has shown growth in 20 of the past 22 months since January 2023, with October's reading standing 3.7 percentage points above the 2024 average of 52.3%.

"The increase in the Services PMI in October was driven by boosts of more than 4 percentage points for both the Employment and Supplier Deliveries indexes. The Business Activity and New Orders indexes both dropped by at least 2 percentage points. Each of the four subindexes are now above their averages for 2024," stated Steve Miller, chair of the ISM Services Business Survey Committee, said.

ISM Services PMI For October: Key Highlights

  • The subindex for Business Activity eased from 59.9% to 57.2% in October.
  • The subindex for New Orders eased from 59.4% to 57.4% in October.
  • The subindex for Prices eased from 59.4% to 58.1%.
  • The subindex for Employment rose from 48.1% to 53%, well above the expected 48%. The outcome marked the highest level in employment index since September 2023.
"Concerns over political uncertainty were again more prevalent than the previous month. Impacts from hurricanes and ports labor turbulence were mentioned frequently, although several panelists mentioned that the longshoremen's strike had less of an impact than feared due to its short duration," Miller added.

Market Reactions

On Tuesday, U.S. stocks rebounded as investors reacted positively to the latest ISM Services PMI data, alleviating earlier political concerns as Americans headed to the polls to elect the 47th president.

The S&P 500, represented by the SPDR S&P 500 ETF Trust (SPY  ), rose 0.8%. The tech-heavy Nasdaq 100, tracked by the Invesco QQQ Trust (QQQ  ), rallied nearly 1%, while the SPDR Dow Jones Industrial Average ETF (DIA  ) edged 0.6% higher.

Yields on 10-year Treasury bonds rose 7 basis points to 4.36%. The iShares 20+ Year Treasury Bond ETF (TLT  ) fell 0.5%.

The U.S. dollar index - as tracked by the Invesco DB USD Index Bullish Fund ETF (UUP  ) - weakened 0.5%.