The U.S. services sector experienced an unexpected slowdown in its growth momentum last month as respondents expressed caution regarding the economic impact of recent elections and impending tariffs.

The Services Purchasing Managers Index released Wednesday fell to 52.1% in November, down from a two-year peak of 56% in October, missing expectations of a slower deceleration to 55.5%, according to data from the Institute for Supply Management.

“The decrease in the Services PMI in November was driven by decreases in each of the four directly impacting subindexes – Business Activity, New Orders, Employment and Supplier Deliveries,” stated Steve Miller, chair of the ISM Services Business Survey Committee.

November ISM Services PMI: Key Highlights

The broader ISM Services PMI index recorded its fifth straight month of expansionary conditions in November, albeit at a slower speed compared to October. The survey results reinforce the view that the services sector “has returned to sustained growth,” Miller said.

The subindex for Business Activity eased from 57.2% in October to 53.7% in November.

The subindex for New Orders eased from 57.4% to 53.7%.

The subindex for Prices inched up from to 58.1% to 58.2%.

The subindex for Employment fell from 53% to 51.5%.

“Generally, respondents' comments were neutral to positive, and both positive and negative impacts were attributed to seasonality,” Miller said.

“Election ramifications and tariffs were mentioned often, with cautionary outlooks related to the potential impact on respondents' specific industries,” he added.

Market Reactions

The U.S. dollar index (DXY) — as tracked by the Invesco DB USD Index Bullish Fund ETF — fell in the aftermath of the ISM report and erased session gains.

Treasury yields also reversed their trend and flattened across the curve, with the 10-year yield returning to 4.23%, down from 4.27% hit earlier in the day.

Stocks maintained modest early morning gains, with the S&P 500 — tracked by the SPDR S&P 500 ETF Trust ( SPY ) — up by 0.2%.

Blue chips, as monitored through the SPDR Dow Jones Industrial Average ETF ( DIA ) , also inched up by 0.2%. The tech-heavy Nasdaq 100, tracked by the Invesco QQQ Trust, Series 1 ( QQQ ) , rose 0.6%.

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