NEW YORK (TheStreet) -- Is good economic news now bad for stocks? That's a question StockTwits' investors grappled with Monday after two economic reports showed better-than-expected growth in the service industry, yet the market barely responded.
The Institute for Supply Management said Monday that its non-manufacturing index rose to a six month high in April. The Index reading climbed to 55.2%, better than the roughly 54% economists expected, according to separate Bloomberg and MarketWatch polls.
April ISM Non-Manufacturing Index: 55.2 vs. 54.1 expected and 53.1 prior- Tradespoon (@tradespoon) May. 5 at 10:52 AM
MarkIt's purchasing manager's index for the service sector also beat expectations. PMI hit 55 in April. Economists had expected 54.2, according to a Bloomberg poll before the release.
Despite the solid reports, the major indices hovered near flat with many slipping, slightly, into the red. The S&P 500 and Dow each wavered between 0.09% losses and 0.01% gains. The Nasdaq edged higher by noon.
Some on StockTwits.com said strong data was bearish for the stock market. Better U.S. economic performance, they argued, could lead the Federal Reserve to end fiscal accommodation earlier than anticipated, allowing the benchmark interest rate to rise. Rising interest rates would increase the attractiveness of bonds relative to stocks and, potentially, make it more difficult for companies to borrow money, thus hampering corporate earnings growth.
The ISM so darn good, perhaps QE ends early, Int Rates rise earlier?- BL834 (@Lach14) May. 5 at 10:04 AM