Fed Odds Rise as ISM Slows, S&P 500, Nasdaq Rally!

Stocks climbed after a weaker-than-expected ISM services report and a Bank of America Global Research revision that pulled forward expectations for the Federal Reserve’s first rate cut. The developments tightened the odds of near-term easing and helped sustain gains in major U.S. indices, with tech-heavy benchmarks outperforming and select Dow 30 names providing outsized influence.

ISM services slowdown: the facts

September’s ISM Services PMI dropped to 50.0 from 52.0, putting the sector at the edge of expansion and contraction. The employment subindex remained weak at 47.2, signaling continued softness in service-sector hiring. These results arrived while key government releases — notably the official jobs report — were delayed, making the ISM print a more prominent input for traders and strategists.

Why this print mattered for stocks

The cooler ISM reading reduced near-term inflation and labor-market pressure in investors’ models, increasing the probability that the Fed will ease sooner rather than later. Because equity valuations at record levels depend heavily on expectations for interest rates, any credible shift toward an earlier cut can lift multiples and support higher prices, particularly in growth and technology names.

BofA pushes Fed‑cut call to October

Bank of America Global Research moved its forecast for the Fed’s first rate cut from December to October, citing the ISM slowdown and the loss of other official data due to the federal government shutdown. The research note accelerated the timing based on weaker service‑sector momentum and the broader implication of a cooling labor market.

Index and sector implications

With Fed easing priced more aggressively, the S&P 500 and Nasdaq recorded further gains, led by large-cap technology stocks that benefit most from lower discount rates. The Dow Jones Industrial Average also advanced, but its price-weighted construction meant a few high-priced components — UnitedHealth, Caterpillar and IBM were notable examples — had an outsized effect on the index’s move.

Key takeaways

• ISM Services PMI at 50.0 and a weak employment subindex tightened expectations for slower near-term economic growth in services.
• BofA’s call to bring forward the Fed’s first cut to October echoed market pricing and helped underpin risk-on flows, especially into tech stocks.
• The government shutdown’s delay of official data makes surveys like ISM and private indicators more influential for policy and price action.
• Watch breadth: record index prints can mask concentrated leadership — a few stocks can drive headline gains while underlying participation remains narrow.

For traders and investors, the immediate focus will be incoming high-frequency data and Fed commentary that either confirms or pushes back against the newly priced-in easing path. Until the data flow normalizes, expect headline macro releases and large-cap earnings to move benchmarks more sharply.