What a difference a day makes.

Yesterday, as the magnitude of the disappointment from Friday's Institute of Supply Management (ISM) manufacturing "Purchasing Managers Index" (PMI) sank in, investors sold off stocks steeply. This morning, they bounced right back. And what is behind today's rapid rise of stocks? It's ISM at work again, this time with a non-­manufacturing index (NMI). The contrast couldn't be more stark:


Hooray for the McConomy!
Miserable trends in the industrial sector set investors fleeing yesterday, but today, it seems all's right with the world once more. After all, the non-manufacturing (aka "services") sector -- everything from McDonald's (NYSE: MCD) to Marriott (NYSE: MAR) to Bank of America (NYSE: BAC) -- makes up 70% of the U.S. economy. And truth be told, some of the numbers we see in the services PMI report do look good:

  • New orders ticked up 2.5 percentage points in September.
  • Inventories are down 6.5 points, suggesting that demand may surprise to the upside going forward.
  • Best of all, the global economy seems to be cutting us some slack, or picking up our slack, as new export orders surged 11.5% in comparison to August's number.

That's gotta be good news, right?

What's it mean to investors
Judging from today's near-150-point surge on the Dow, it seems this is how investors read the news. A rise in international orders for American-produced services could boost the fortunes of major services "exporters" like ADP (NYSE: ADP), which derives 20% of its revenue from abroad.

It should be even better news for software shops like software-as-a-service specialist salesforce.com (NYSE: CRM), whose on-demand software gets 30% of its revenue stream outside U.S. borders, or Microsoft (Nasdaq: MSFT), which is 42% international. And global consulting king Accenture (NYSE: ACN) actually makes most of its money off foreign clients.

So maybe investors are right to rejoice. Still, last week's depressing manufacturing news worries me. Rather than leap into this rally with both feet, I'd urge caution -- and a focus on valuation. Accenture doesn't look half bad at 10 times free cash flow today, and you already know how much I like Microsoft. ADP has an attractive valuation, too -- and a hefty 3.3% dividend yield, which could help if things go south. On the other hand, whatever ISM may say about international orders, Salesforce still looks expensive to me at far more than 50 times free cash flow.

Know what you're paying for today. Don't put too much faith in a single day's report -- because tomorrow, we could be looking at something completely different.

Got a different read on today's chart? Don't be shy -- tell us about it in the comments section below.

Accenture and Microsoft are Motley Fool Inside Value selections. Salesforce.com is a Motley Fool Rule Breakers recommendation. Automatic Data Processing is a Motley Fool Income Investor recommendation. Motley Fool Options has recommended a diagonal call position on Microsoft and The Fool owns shares of Microsoft.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Fool contributor Rich Smith does not own shares of any company named above. Rich is not a licensed economist, but he plays one on the Web. Check out his latest stock recommendations on Motley Fool CAPS. The Motley Fool has a disclosure policy.