Rising Producer Prices Spark Inflation Concerns: Are Fed Rate Cuts At Risk? 7 ETFs To Watch
Portfolio Pulse from Piero Cingari
Rising U.S. inflation rates in February, with unexpected increases in both the Consumer Price Index (CPI) and Producer Price Index (PPI), have sparked concerns over the Federal Reserve's potential rate cuts. The CPI and PPI reports showed year-on-year increases of 3.2% and 1.6%, respectively, with significant contributions from a 6.8% surge in gasoline prices. These inflation figures challenge the Fed's hopes for easing inflation towards a 2% target and may affect the anticipated interest rate cuts. The market reacted with Treasury yields rising, the U.S. dollar strengthening, and declines in ETFs tracking bonds, the S&P 500, tech stocks, small caps, gold, and Bitcoin.
March 14, 2024 | 4:19 pm
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POSITIVE IMPACT
The Invesco DB USD Index Bullish Fund ETF (UUP) rose 0.5% as higher-than-expected PPI data fueled demand for the U.S. dollar.
The PPI report's indication of rising inflation increased demand for the U.S. dollar, positively affecting UUP's performance.
CONFIDENCE 85
IMPORTANCE 75
RELEVANCE 90
NEGATIVE IMPACT
The SPDR Gold Trust (GLD) eased 0.6% as higher Treasury yields and worsening risk sentiment affected gold prices.
The rise in Treasury yields and a shift in risk sentiment following the inflation reports have led to a decrease in GLD.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 80
NEGATIVE IMPACT
The iShares Bitcoin Trust (IBIT) fell 4.3%, significantly impacted by the inflation data and the resulting increase in Treasury yields.
The adverse market reaction to the inflation reports and the rise in Treasury yields have negatively affected IBIT.
CONFIDENCE 80
IMPORTANCE 75
RELEVANCE 80
NEGATIVE IMPACT
The iShares Russell 2000 ETF (IWM) saw a significant 1.8% drop, underperforming amid the inflation concerns and market adjustments.
The inflation reports have particularly affected small caps, leading to a notable decline in IWM.
CONFIDENCE 85
IMPORTANCE 85
RELEVANCE 85
NEGATIVE IMPACT
The Invesco QQQ Trust (QQQ) fell 0.4% amid market reactions to the inflation reports and concerns over monetary policy adjustments.
Concerns over the Fed's response to the inflation reports have led to a decrease in QQQ's value.
CONFIDENCE 80
IMPORTANCE 75
RELEVANCE 85
NEGATIVE IMPACT
The SPDR S&P 500 ETF Trust (SPY) experienced a 0.3% decline in response to the inflation data and its potential impact on Fed rate cuts.
The unexpected inflation figures have led to uncertainty regarding the Fed's interest rate policy, negatively impacting SPY.
CONFIDENCE 80
IMPORTANCE 80
RELEVANCE 85
NEGATIVE IMPACT
The iShares 20+ Year Treasury Bond ETF (TLT) fell 1.5% amid rising Treasury yields following the inflation reports.
The unexpected inflation data led to a rise in Treasury yields, negatively impacting bond prices and causing TLT to decline.
CONFIDENCE 85
IMPORTANCE 80
RELEVANCE 90