PBW - Inflation Cools in June Triggers Spike in Laggard ETFs | Benzinga
Inflation in the United States cooled down in June for the third consecutive month. The Consumer Price Index rose just 3% year over year last month, down from an annual growth of 3.3% in May. On a monthly basis, the index declined 0.1% from May's flat reading. This marked the first monthly drop in inflation since 2020 and the slowest annual price gain since March 2021.
The so-called core inflation, which strips out volatile components such as food and energy prices, rose only 0.1% over the prior month, the lowest monthly core reading since August 2021, and 3.3% from the year-ago month. Both numbers are down from May's reading of 0.2% monthly growth and 3.4% annual growth.
Following the encouraging inflation data, markets priced in a roughly 89% chance that the Fed will begin to cut rates at its September meeting, up from 75% a day prior, according to data from the CME Group. This has deepened the market's confidence that the Fed would begin cutting interest rates in September, leading to a sector rotation from the hot technology sector to the laggards that could benefit from falling rates like industrials and small caps.
In particular, the small-cap Russell 2000, which has significantly lagged this year, jumped 3.4% to a more than three-month high. The S&P 500 real Estate index jumped 2.8%, trimming its year-to-date losses to 1%. As such, ETFs from some beaten-down corners of the market saw smooth trading following the inflation data. These include iShares U.S. Home Construction ETF (BATS: ITB), Invesco WilderHill Clean Energy ETF (ARCA:PBW), Virtus LifeSci Biotech Clinical Trials ETF (ARCA:BBC), iShares Micro-Cap ETF (ARCA:IWC) and SPDR S&P Regional Banking ETF ...