US midday market brief: stocks near record highs as energy, macro data temper broad rally

• The ISM services index hit 54.4 in December with new orders at 57.9, but input price inflation remained elevated at 64.3, complicating the Fed's rate-cut calculus
• ADP reported only 15,000 private sector jobs added in December versus 45,000 expected, signaling potential labor market cooling faster than anticipated
• Energy stocks led by Valero (+3%) initially boosted the rally on Venezuelan oil-supply optimism, but crude prices fell with WTI dropping $0.44 to $56.69 per barrel on oversupply concerns

Market Summary: US Stocks Retreat from Intraday Highs Amid Mixed Economic Signals

Market Performance:

US equities reached fresh intraday records on Wednesday before reversing course by midday. The Dow Jones fell 0.5% to 49,221.89 after hitting an intraday peak of 49,368. The S&P 500 closed essentially flat at 6,937.81, down 6.9 points after approaching the 7,000 level. The Nasdaq posted modest gains of 0.13% to reach 23,578.

Key Economic Data:

The Institute for Supply Management's December services PMI registered 54.4, a 10-month high, with the new-orders component reaching 57.9 and business activity climbing to 56.0. This signals economic resilience driven by AI-related productivity gains. However, service-sector input prices remained elevated at 64.3, near a 13-month high, indicating persistent inflation pressures.

ADP private payrolls data showed significant weakness, missing the 45,000 forecast, suggesting the labor market is cooling faster than anticipated.

Sector Highlights:

Energy refiners led early momentum, with Valero Energy surging 3% on reports of potential Venezuelan crude supply resumption under US oversight. However, West Texas Intermediate crude fell $0.44 to $56.69 per barrel on global oversupply concerns.

Market Implications:

The session revealed conflicting signals: strong services activity versus weak employment and persistent inflation. This complicates the Federal Reserve's rate policy outlook. While weak jobs data typically supports rate cuts, sticky service-sector inflation could limit the Fed's flexibility and risk reigniting broader inflation.

Investors are now awaiting upcoming data releases, including the Producer Price Index (January 14) and Consumer Price Index (January 15), for clearer direction on inflation trends.