TD Securities strategists highlight upcoming US data, expecting the ISM Services Index to rise, supported by new orders and supply chain issues linked to the Iran conflict. The report notes stronger JOLTS job openings and mixed labor ratios, and stresses that Middle East headlines and ceasefire progress could overshadow US data for markets.

Services strength and labor stabilization

"On Wednesday, ISM services, ADP employment and S&P services PMIs will grab attention in the morning. Fed's Barr and Logan are set to speak, with the Fed's Beige Book being released in the afternoon. Still, focus remains on stories coming from the Middle East, with any news of progress towards a ceasefire outweighing the data."

"We expect ISM services will improve in May to 54.7 from 53.6 previously (consensus: 53.8). The increase will likely be led by new orders and supplier deliveries. The latter reflects ongoing supply chain issues stemming from the Iran conflict."

"The prices paid measure will garner attention as it signals the extent of the ongoing impact to inflation from high energy prices."

"Leading indicators for job openings also suggest the April increase is likely overdone, and we would look for mean-reversion in May. Note that job openings are notoriously volatile, which is why we put more weight on the ratios. In addition, a large portion of the April increase was concentrated in professional and business services."

"All in, labor market indicators continue to provide signs of stabilization, with some signs of improvement. The focus will turn to NFP on Friday."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)