A waitress delivers a tray of food to customers at a Denny's restaurant in New York.

The U.S. services sector expanded at a faster rate than expected, according to data released Wednesday.

The Institute for Supply Management's non-manufacturing index rose to 56.9 in May from 55.5 in April. Economists polled by Refinitiv expected the index to remain unchanged. A number above 50 indicates expansion while a print below 50 shows contraction.

Business activity in the sector rose to 61.2 from 59.6 in April, its 118th straight month showing expansion. New orders in the services sector also grew at a faster rate in May relative to April.

"The non-manufacturing sector continues to experience a slight uptick in business activity, but it is still leveling off overall," Anthony Nieves, chair of the Institute for Supply Management, said in a statement. "Respondents are mostly optimistic about overall business conditions, but concerns remain about tariffs and employment resources."

The ISM data follows the release of much weaker-than-expected employment data from ADP and Moody's Analytics. Private payrolls increased by just 27,000 in May. Economists expected them to grow by 173,000, according to a Dow Jones estimate.

Treasury yields pared losses after the ISM data was released. The 2-year rate traded at 1.81% after hitting its lowest level since December 2017 earlier in the day. The 10-year yield recovered to trade at 2.1%.﻿

The services data was also a welcomed surprised after ISM's manufacturing gauge fell in May to its lowest level since October 2016.

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