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Instant View: ISM services data short of expectations

NEW YORK (Reuters) - Non-manufacturing activity grew at a slower rate in June than expected, according to the Institute for Supply Management.

KEY POINTS: * The non-manufacturing ISM index fell to 53.8 in June from a reading of 55.4 in May. The expectation was for a reading of 55. A reading above 50 indicates growth in the services sector of the economy.

COMMENTS:

STUART HOFFMAN, CHIEF ECONOMIST, PNC FINANCIAL SERVICES GROUP, PITTSBURGH:

“Part of the reason I had expected it to edge down was the weakness we keep seeing in construction. We know that services haven’t been coming back as much as manufacturing. The thing is, it is still comfortably above 50 and that is good news but it has edged down a little bit. That probably suggests a little softer retailing and definitely some weaker construction activity, but it does say the services sector is still comfortably expanding, but not at a rapid pace.”

PETER JANKOVSKIS, CO-CHIEF INVESTMENT OFFICER, OAKBROOK

INVESTMENTS LLC, LISLE, ILLINOIS:

“I would describe it as pretty disappointing across the board. The biggest issue I see, and it’s a relatively small change, but if you look at the employment sentiment - it dropped below 50. And right now the labor market. And rightfully so, is everybody’s focus.

“It’s interesting, the market itself doesn’t seem to be reacting particularly negatively to the number. A lot of the selloff, the pressure was originating from overseas -- you had the Chinese news toward the end of the quarter pushing the market down.

“It could very well be that these numbers are not out of line with what people were expecting for the U.S. as a whole. They are expecting a little bit of a pullback, a little bit of slowdown. But putting on top of it, the news coming out of China and all those fears, that caused the oversold condition.”

CHARLES LIEBERMAN, CHIEF INVESTMENT OFFICER, ADVISORS CAPITAL MANAGEMENT, LLC, PARAMUS, NEW JERSEY;

“It’s consistent with the general tone of data, suggesting that the pace of growth is a little more moderate.

“It’s certainly not suggestive of the double-dip scenario that some people are pushing.

“The fear that is priced into the market is based on a significant probability of a double-dip recession, so anything that suggests the economy is still actually growing is actually a lot better reflected in current market prices.

“Everyone’s fearful of a double-dip, so the rally having a global basis suggests the realization is sinking in that a double-dip remains pretty unlikely.”

JULIA CORONADO, SENIOR U.S. ECONOMIST, BNP PARIBAS, NEW YORK

“The reading obviously shows downshifting in the pace of activity. It’s still expanding activity in the service sector but it’s less than we had expected.

“It was pretty broad-based -- export orders fell, new employment. It’s above 50 and it’s well above 50 so it’s not saying we’re double dipping.

“It’s not a falling-off-the-cliff report. It’s just a downshifting. Things are slowing a bit and that’s disappointing because we’re at a fairly delicate stage of the recovery.

“The best leading indicator here would be the new orders index that fell to 54.4--that’s still a pretty decent expansion. It’s more just a softening and coming a little bit earlier in a recovery than you would expect and therefore that’s disappointing.”

WAYNE KAUFMAN, CHIEF MARKET ANALYST, JOHN THOMAS FINANCIAL, NEW YORK

“A little disappointing, but still above 50, so that’s good. My knee-jerk reaction is that it isn’t that different than what was expected, so it won’t bother people, especially since its still above 50. You can see the markets aren’t exactly selling off on this.”

JOSEPH TREVISANI, CHIEF MARKET ANALYST, FX SOLUTIONS, SADDLE RIVER, NEW JERSEY:

“The slowdown in the U.S. economy is real, the change in direction is serious. Statistics do not yet indicate a recession but the mood is worrying. The dollar will continue to weaken for this reason and also because the European debt crisis has calmed down.”

MARKET REACTION: STOCKS: U.S. stock indexes held gains BONDS: U.S. Treasury debt prices were little changed DOLLAR: U.S. dollar was down against the yen

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