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The S&P 500 hit yet another record high on Wednesday during an extended holiday session, as lacklustre economic data fueled hopes for sooner-than-expected interest rate cuts. For US investors, this was music to their ears. The market had been buoyant, thanks to Federal Reserve Chair Jerome Powell's hints about progress in curbing inflation.

It certainly feels like the Fed's deliberate attempt to slow down the US economy is finally taking hold. Hiring has downshifted, jobless claims are on the rise, and the key measure of the US services sector activity unexpectedly plunged into contraction territory for June.

According to ADP, private employers in the US added just 150,000 jobs last month, bringing the three-month moving average down to 165,000—the slowest pace since February. Additionally, year-over-year pay growth for "job-stayers" in ADP’s “Pay Insights” series dipped below 5% in June, marking the first time it's seen a number starting with a "four" since July 2021. For "job-switchers," pay growth was 7.7%, with the gap between the two—essentially the reward for quitting—holding steady at 2.8 percentage points.

This update came on the heels of a JOLTS report suggesting US job openings unexpectedly rose in May. Confused? Indeed, BLS data is all over the map.

Meanwhile, jobless claims, released early to accommodate July 4th, showed initial filings at 238,000 for the week ending June 29, higher than expected. The four-week moving average now sits at 238,500.

But the real shocker—for the day and potentially for the month—was the marquee gauge of US services sector activity plunging into contraction for June. The ISM services headline came in at 48.8, far below the consensus of 52.5 that economists had anticipated. June's figure was the lowest since May 2020, marking the worst reading on overall US services sector activity since the pandemic first hit.

The interest rate market reaction was swift as two-year yields were nosedive on ISM services data.

In stark contrast, the final read on S&P Global’s services sector gauge for June reached a healthy 55.3, an improvement from the already robust flash reading. The spread between the ISM and S&P Global headlines was the widest in favour of S&P Global's gauge since the summer of 2021. Confused? Yup.

Anyway, by Friday noon, Wednesday’s data will likely be irrelevant for markets and the Fed, as all roads lead to Friday's Non-Farm Payrolls (NFP) report, even if it's a figure not always rooted in reality.

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