Daily Market Color

More Data Pointing to Economic Slowdown

Rates fall in risk-off session. Swap rates and Treasury yields declined slightly today despite an afternoon selloff, with the 2-year yield falling ~5bps to 3.78% while the 10-year yield declined~3bps to 3.31%. The 10-year yield is now nearly 150bps lower than the yield on the 3m Treasury Bill, which is the largest inversion in decades. The bond rally, spurred by employment change and PMI misses, sees the 2-year yield down ~65bps year-to-date. The S&P 500 (-0.25%) and NASDAQ Composite (-1.07%) declined on the sentiment, continuing yesterday’s downward move.

More data today showing signs of economic contraction. Ahead of unemployment data this Friday, the ADP change in employment release today came in far under expectations, one of several recent signals that the economy is slowing. Companies with 50-249 employees led the March gains, adding 75,000 employees in total, while those with 250-499 saw a decline of 42,000 workers. By industry segment, leisure and hospitality led with 98,000 new hires, while financial and professional services lost a total of 97,000 workers. This is in-line with the ISM and S&P Global US Services PMI data released today which showed considerably weaker new orders growth and softer business activity.

Day ahead. Initial jobless claims data, expected to increase slightly to 200k from 198k, will lead an otherwise quiet session. Fed hawk James Bullard will make public comments at 10:00 AM EST.

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