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 April's 62,000 and far short of economists’ expectations for 115,000, according to the National Employment Report from Automatic Data Processing Inc. The May print marked the lowest figure since March 2023, reinforcing concerns about a cooling labor market.

Bond markets reacted strongly to the disappointing data, with yields declining across the Treasury curve.

The iShares 20+ Year Treasury Bond ETF TLT surged 1.9%, on track for its best day since late November 2024,

This rally in bonds came even as the Congressional Budget Office flagged on Wednesday significant fiscal risks from President Donald Trump's "One Big Beautiful Bill," which is projected to expand the federal deficit by $2.4 trillion over the next decade.

Gold gained 0.7% to trade near $2,380 per ounce as traders sought refuge from potential volatility, while oil prices fell 1% after two strong sessions, with West Texas Intermediate crude slipping to $62 per barrel.

Bitcoin BTC/USD held steady around $105,000.

Wednesday’s Performance In Major U.S. Indices, ETFs

According to Benzinga Pro data:

• The SPDR S&P 500 ETF Trust SPY inched 0.1% up to $596.79.
• The SPDR Dow Jones Industrial Average DIA was steady at $426.08.
• The tech-heavy Invesco QQQ Trust Series QQQ rose 0.3% to $528.65.
• The iShares Russell 2000 ETF IWM edged 0.2% lower to $208.67.
• The Health Care Select Sector SPDR Fund XLV outperformed, up 0.8%; the Energy Select Sector SPDR Fund XLE lagged, down 1.7%.

Wednesday’s Stock Movers

• CrowdStrike Holdings Inc. CRWD dropped 5.6% after reporting quarterly revenue that came in slightly below Wall Street estimates, disappointing investors despite strong year-over-year growth.
• Other stocks reacting to earnings included Hewlett Packard Enterprise Co. HPE, up 0.54%; Guidewire Software Inc. GWRE, up 16%; Dollar Tree Inc. DLTR, down 6.6% and Thor Industries Inc. THO, up 3.2%.
• Wells Fargo & Co. WFC gained 1% after the Federal Reserve removed a long-standing asset cap that had restricted the bank's total assets to $1.95 trillion since 2018.
• Companies slated to report earnings after the close include MongoDB Inc. MDB and Five Below Inc. FIVE.

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