Equal Weight RSP Rises While SPY, Airline ETFs Drop

U.S. stocks ended mixed Thursday as a slide in mega-cap tech stocks along with some disappointing corporate earnings offset cooler inflation data in the June CPI report.

The cap-weighted SPDR S&P 500 ETF Trust (SPY) was pulled down 0.9% by its heavy tech weighting, whereas the evenly allocated Invesco S&P 500 Equal Weight ETF (RSP) gained 1.2%.

The U.S. Bureau of Labor Statistics reported an unexpected 0.1% month-over-month decline in headline CPI inflation, the first decrease in 18 months. Economists had been expecting a 0.1% gain from May.

With a Fed rate cut becoming more likely, the bond market also reacted favorably to the inflation news as the rate-sensitive iShares 20+ Year Treasury Bond ETF (TLT) rose 1%.

Airline ETFs Fall on Delta Earnings

Delta Airlines adjusted earnings fell short of analysts’ expectations in a challenging air travel market.

Exchange traded funds with the largest allocations in Delta Airlines closed in negative territory as the airline reported disappointing second quarter earnings.

The U.S. Global Jets ETF (JETS), which has a 9.6% holding in its $107 million portfolio, fell 0.6%. The Themes ETF Trust - Themes Airlines ETF (AIRL) fell 0.4% and the Defiance Hotel, Airline, And Cruise ETF (CRUZ) dropped 0.2%.

Spot bitcoin exchange traded funds jumped on Thursday after the U.S. Department of Labor released its latest encouraging inflation data.

The five largest ETFs in the category by assets under management—the iShares Bitcoin Trust (IBIT), the Grayscale Bitcoin Trust (GBTC) and Fidelity Wise Origin Fund (FBTC), ARK 21Shares Bitcoin ETF (ARKB), and Bitwise Bitcoin ETF (BITB)—pared earlier gains and were all up about 0.5%.

IBIT 1 Month

Source: etf.com

The surge came after the U.S. Department of Labor reported that the Consumer Price Index, a widely watched inflation measure dropped an unexpected 0.1% in June from the previous month and gained 3% annually versus the May 3.3% increase. Both readings were better than analysts had forecast and spurred optimism that the U.S. central bank had enough evidence that prices were waning enough to justify an interest rate cut in September, if not before.

“Stocks and other risk assets like BTC benefit from lower rates as investors are incentivized to move money from money market funds and other savings accounts into risk assets with higher potential returns,” wrote Peter Eberle in a message to etf.com. 

Stocks Mixed, Bond Yields Slip

The narrow SPDR Dow Jones Industrial Average ETF Trust (DIA), which tracks the 30-stock index, moved up 0.1%. The broader Fidelity NASDAQ Composite Index ETF (ONEQ), which tracks the Nasdaq index of several thousand stocks, fell 1.5%. 

Treasury yields dropped as investors cheered a continued cooling trend in inflation. Odds of a rate cut at the next Fed Open Markets Committee in September jumped to 85% from 68% a week ago.

Spot Bitcoin Funds' Sputter

Bitcoin was recently trading at about $58,000, roughly flat over the past 24 hours, according to crypto data provider CoinMarketCap. The largest cryptocurrency with a $1.2 trillion market capitalization is down more than more than 20% since reaching its all-time high of over $73,000 in March.

Flows to the 11 funds have been uneven over this nearly four-month period with second-quarter inflows falling far short of the total over the first three months. Analysts attributed the decline to miners who validate transactions on the blockchain and profit taking among major holders, including the German state of Saxony and U.S. government selling assets. 

The June Consumer Price Index fell 0.1% from the previous month vs. a 0.1% gain expected and 0.0% in May and a 3.0% increase year-over-year vs. 3.1% expected and 3.3% in May.

The Core CPI, which excludes food and energy, rose 0.1% month-over-month vs. 0.2% expected and 0.2% prior. Core was up 3.3% over the past year vs. 3.5% expected and 3.4% prior.

Treasury yields dropped on the news and stock futures spiked as investors cheered a continued cooling trend in inflation.

By mid-morning trade, the greatest beneficiaries of the surprise drop in CPI inflation were rate-sensitive long bond ETFs like the iShares 20+ Year Treasury Bond ETF (TLT), up 1.3% as bond prices have an inverse relationship with yields, and the iShares Russell 2000 ETF (IWM), which gained 3.4% on the news.