Stock market today: Dow, S&P 500 close at record highs to cap Wall Street's latest winning week

The US services sector gauge from the Institute for Supply Management fell 2 percentage points to 50% in September from the previous month. The reading was below the 51.7% economists’ forecast, per Bloomberg consensus data.

Business activity within the sector also fell to 49.9%, down from 55% in August. “This is the first time the index has entered contraction territory since May 2020,” the release said, noting 50% marks the breakeven point between expansion and contraction.

The prices paid for materials and services increased to 69.4% from August’s 69.2%. It’s now approaching October 2022’s all-time high of 70.7%.

“This is telling you that maybe the inflationary pressures that are the biggest worry, and [have] been the biggest worry in many FOMC speeches, are beginning to show more signs of life,” Torsten Sløk, Apollo Global chief economist, told Yahoo Finance. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)

“The higher rise in service sector inflation we just got … is suggesting that maybe inflation is going to be more sticky and more elevated,” Sløk said.

The next Consumer Price Index (CPI) report from the Bureau of Labor Statistics is expected to come out on Oct. 15 at 8:30 a.m. ET, but may be delayed if the government shutdown continues. Services make up 60% of the CPI index, whereas goods account for 40%.

The ISM’s employment index also remained in contraction but increased to 47.2% in September from August’s reading of 46.5%. Respondents said artificial intelligence is positively impacting resource productivity.