The ISM Service Index advanced in March rather than declining from February’s level. More importantly, the services employment index climbed for a third month to the highest since December 2021.
Moreover, a measure of costs paid for material and services increased to one of the firmest readings since early 2023, underscoring the challenge Federal Reserve policymakers face to tamp down inflationary pressures.
This survey suggests steady business activity, perhaps negating the widely published report that the Atlanta Fed’s GDPNow forecast is projecting GDP to decline during the first quarter.
Most have never heard of the GDPNow forecast and those who have discount readings this early into the quarter. The data represents only two to three weeks of activity that occurred in the first part of the quarter. To remind all the data was collected during the harsh early winter weather and the Boeing strike. Moreover, the data is prone to significant revisions.
Perhaps writing the obvious, there is great uncertainty about future business activity due to the risk of tariffs and other potential government actions. No one can accurately suggest the outcome much less whether the tariffs will be levied and what products may be exempted.
Speaking to which, equities rebounded early yesterday afternoon following headlines the Administration is considering a one-month delay for automakers from newly imposed tariffs on Mexico and Canada.
Commenting about the Treasury markets, Treasuries were unfazed by the “massive” selloff in the German bond market, selling spurred by the gargantuan expansion of defense spending by Germany. German debt saw their worst day since the months following the fall of the Berlin Wall according to Bloomberg.
Short term Treasuries however rallied as traders are now suggesting 75 bps of cuts occurring by year’s end, the result of tariff and economic uncertainties. Longer dated Treasuries, however, sold off, causing a moderate steepening in the curve
The S & P 500 is in a volatile yet narrow trading range. According to Bloomberg this index has moved 1% in either direction during 12 out of the last 41 trading sessions in 2025, the vast majority occurring within the past two weeks. The averages ended higher by around 1%.
What will happen today? Will it be a quiet day ahead of tomorrow’s BLS Employment report?
Last night the foreign markets were mixed. London was down 0.86%, Paris was down 0.43% and Frankfurt up 0.50%. China was up 1.17%, Japan up 0.77% and Hang Seng up 3.29%.
Dow and NASDAQ futures are off 0.8% and 1,30%, respectively for a myriad of factors. There is confusion over tariffs, the worst German bond market rout since 1990, and “a raft of disappointing earnings in the tech sector and further signs of Chinese innovation in artificial intelligence” as per Bloomberg.
The 10-year is off 9/32 to yield 4.32% causing a steepening in the yield curve by the greatest degree in over three years.
