Daily Market Color March 3, 2021Yield Volatility Returns Tech drags down equities while Treasurys sell-off Tech shares led the rout in equities yet again, with the Nasdaq 100 down 2.9% and the S&P decreasing 1.31% on the day. Investors assessed mixed economic data, as the ADP job data missing expectations while material prices continued to increase. The yield/swap curve steepened dramatically throughout the trading session – the 10y UST yield finishing up 9bps to 1.48%. Inflation expectations increase to twelve-year high Investors are pricing in for higher inflation with vaccine and stimulus aid developments pointing to a potential faster economic recovery. The anticipated annual inflation rate exceeded 2.5% for the first time since 2008. ADP job data misses expectations ADP’s February job data revealed the number of employees at U.S. companies increased less than economists’ estimates. Company payrolls increased 117,000 in February with the median expectations at 205,000. January data had U.S. companies adding 195,000. Service provider growth hits nine-month low The ISM’s services index fell to 55.3 in February down from a reading of 58.7 in January. A reading above 50 signals growth. Measures of orders and business activity also decreased to the lowest levels since May 2020. Two primary variables in the decrease were the polar vortex that brought severe weather throughout the U.S. and capacity constraints. The data release also revealed that prices paid for materials jumped to the highest levels since September 2008.
