Daily Market Color May 10, 2021Yield Curve Steepens as Tech Drags Down Equities Tech falls on inflation concerns Although the DJIA breached 35,000 for the first time, tech shares ultimately led all three major indices lower on the day with the Nasdaq decreasing 2.6% on inflation fears. Flaming inflation concerns were commodities prices — copper reaching an all-time high, iron ore increasing more than 10% during trading, and volatility in West Texas Intermediate as a cyber attack closed a major U.S. oil pipeline over the weekend. Rates increased across a steepening curve as investors await inflationary data (CPI released 5/12 and PPI 5/13) and key UST auctions (3y auction 5/11, 10y 5/12, and 30y 5/13) later this week. The 10y UST yield closed 3bps higher from Friday’s close to 1.60%. Worker pay sees largest quarterly increase since 2003 Firms are having issues finding qualified employees to fill vacant jobs as economic activity picks up, and have resulted in offering signing bonuses and increasing wages to attract new applicants. The 1.1% QoQ change in wages and salaries during 1Q was the most significant quarterly increase in 18 years. Chicago Fed President speaks to employment and inflation In an interview early in the day, Chicago Fed President Charles Evans commented that inflation rates of 2.5% would not concern him as long as it’s in line with the Fed’s 2% average over a period of time. Evans further affirmed that employment and inflation are still quite a bit away from levels that would persuade him to update his policy recommendations.
