ETF Spotlight: SPY Falls on Inflation News

The SPDR S&P 500 ETF Trust (SPY) has fallen more than 2% this week on a broader market selloff, veering from the stellar bull run for the fund, which tracks the S&P 500.

The ETF, which follows a market cap weighted index of large and mid-cap stocks, surged at the end of last year and through the first quarter of this year on the gains of high-flying tech stocks, including AI-focused chip maker Nvidia. 

Overall, the S&P 500 gained 10% over the first quarter of 2024 when the index soared past 5,000 to set the first of several all-time highs. The SPY ETF is still up 6.5% year to date, but in the past week, is down 2% on news that inflation has been stickier than expected.

CPI Report Triggers Selloff

The March consumer price index (CPI), released last week, rose 3.5% year over year, indicating that inflation is still cooling at a slower rate than Federal Reserve bankers had hoped.

“After a relentless, double-digit rally in the S&P 500, investors turned slightly more bearish this week due to a surge in bond yields,” etf.com Sumit Roy said. “Three straight, higher-than-expected inflation prints were the catalyst for the downturn, and now we’ll see whether this sell off is a garden-variety pullback or turns into something bigger in the coming weeks,” he added.

Investors have drained $13.6 billion in outflows from SPY since the beginning of April, according to etf.com data. Overall, outflows year to date from SPY total $22.8 billion. 

Contact Lucy Brewster at [email protected].