CPI Report Sends Ripples Through 5 Key ETFs: Banks Stumble, Bonds Waver, Tech Resilient

The August inflation report released by the Bureau of Labor Statistics on Wednesday provided a hotter picture than expected, resurrecting inflationary concerns that lay dormant for more than a year.

Many economists now assert that the Federal Reserve’s intentions to maintain interest rates in the upcoming week are virtually sealed, with market sentiment indicating a probability of no September rate hike exceeding 94%. However, the outlook for the November meeting remains shrouded in mystery, with the likelihood of a rate hike hovering around 43%.

Let’s delve into how five prominent ETFs responded immediately following the release of the CPI report on Wednesday.

Consumer Discretionary

The Consumer Discretionary Select Sector SPDR Fund XLY demonstrated robust performance, gaining 0.4% during the morning session in New York. This marks it as the top-performing sector within the S&P 500.

The market’s interpretation seems to suggest that rising consumer prices could translate into higher profit margins for retail companies. Key drivers behind this sector’s rise were Amazon Inc. AMZN and Tesla Inc. TSLA, both posting gains of 1.4% and 1.3%, respectively.

Read now: Apple Event Fails To Impress Bulls: Why Apple Stock Is Now In Bearish Slide

Semiconductors

The semiconductor industry responded positively to the August Consumer Price Index report.

The VanEck Semiconductor ETF SMH saw a 0.9% daily increase, with nearly all of its holdings delivering positive performances during the session, except for Intel Corp. INTC.

Leading the charge in this sector was Advanced Micro Devices Inc. AMD, posting a daily performance increase of 2.1%, closely followed by Micron Technologies Inc. MU.

Technology

Contrary to expectations, a generally higher-than-anticipated inflation report did not send shockwaves through the technology sector.

The Technology Select Sector SPDR Fund XLK managed to secure a 0.5% positive performance for the day. The bulk of this success can be attributed to the positive impact from the semiconductor sector. Additionally, Adobe Inc. ADBE emerged as one of the top performers, registering an impressive 3% gain.

Regional Banks

Wednesday proved to be a challenging day for regional bank stocks, with the SPDR Regional Banking ETF KRE slipping by 1%. This extended the monthly decline to almost 9%.

Zions Bancorporation ZION took center stage as the primary drag on the industry, experiencing a 4.4% decline.

Long-Term Treasury Bonds

Long-term Treasuries continued to face headwinds, as evidenced by the iShares 20+ Year Treasury Bond ETF TLT, which dipped 0.4% during the session. This decline was driven by a minor uptick in thirty-year yields.

The persistent threat of inflation could potentially keep interest rates elevated for an extended period, providing support to yields on the longer end of the Treasury yield curve.

Over the past three months, the TLT ETF has experienced an 8% decline, with a nearly 12% decrease over the past year.

Now read: UAW Threatens Strike At Targeted Auto Plants If Labor Deals Not Reached: Report

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