Contracting Jobs Market Lifts Fed Rate-Cut Expectations
Let's break down ISM’s November Services PMI report and its implications. Plus, Microsoft’s AI sales target woes, initial Marvell thoughts and more.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
Following our analysis of ADP’s November jobs data, we’re turning our attention to ISM’s November Services PMI report, and while it showed persistent inflation pressures, it confirmed that job creation contracted in November.
ISM’s headline November Services PMI came in at 52.6, a more vibrant figure than the expected dip to 52.1 the market expected from October’s 52.4 reading. The net view between those numbers is that the services side of the economy continues to grow, and that led the overall economy to grow at about the same pace it did in October, when we factor in ISM’s November Manufacturing PMI data.
Looking at the November new order data, we find new orders for the services economy continued to grow in November, but the rate of growth slowed, with that sub-index falling to 52.9 from October’s 56.2. Layering in ISM’s November Manufacturing findings, the composite rate of new order activity slowed several points compared to October, but still managed to grow modestly.
Now let’s turn to the two items Fed watchers, and many in the market will be focusing more of their attention on – job creation and inflation.
On the employment front, the ISM Services PMI Employment Index rose to 48.9 in November, hitting its best level since 50.7 in May. While that sounds like a positive, let’s remember a figure below 50 indicates a contraction, and also consider that the November Manufacturing PMI Employment Index fell to 44 from 46 in October. Combining those November figures points to a contracting job market, backing what we saw in ADP’s figures this morning.
On the topic of inflation, the fall in the ISM Services PMI Prices index to 65, the lowest level in the last eight months, was a welcome sight. But in keeping with a figure above 50 signaling rising prices, the November data tell us prices continued to rise, although at a somewhat slower pace. Stepping back and looking at the bigger picture, the ISM Services PMI Prices index has exceeded a reading of 60 for the last 12 consecutive months.
What Do We Think?
The sequential dip in ISM’s composite November Price Index is overshadowed by the continued contraction in the composite Employment Index and the three-month moving average of ADP’s Employment Change Report data. That means we’re not surprised by the nudge higher in rate-cut expectations shown by the CME FedWatch tool, which now sees an 89% chance of a 25-basis point rate cut next week.
Normally, this would be lifting the market, but weighing on stocks today is a report published by The Information that Microsoft (MSFT) is cutting software sales quotas for AI. The report suggests customers are resisting newer products, and compared against comments yesterday from Amazon (AMZN) that AWS is turning down business given capacity constraints, this sounds more like a Microsoft-specific issue.
We’ll look to the Deal/Book Summit later today when Anthropic CEO Dario Amodei and Palantir’s (PLTR) Alex Karp take the stage and share what they are seeing. No doubt, the question about The Information article will be asked (or at least it should be).
Coming Up: More on Marvell and Amazon
Coming up, we’ll be sharing our thoughts on quarterly results from Marvell (MRVL) last night, and its announced acquisition of Celestial AI. We very much liked what we saw, developments that have led many across Wall Street to become incrementally bullish on MRVL shares and lift their price targets.
We are reviewing our current $125 target, and we’ll have more to say on that shortly.
We’ll also have comments from Amazon’s AWS re:Invent 2025 event yesterday, including what was said about Trainium, one of several programs for Marvell’s custom AI chip business.
At the time of publication, TheStreet Pro Portfolio was long MRVL, MSFT and AMZN.
