Could June Producer Inflation Data Dampen Market Enthusiasm For Rate-Cut Winners? 5 ETFs To Watch Friday

The larger-than-expected drop in the June Consumer Price Index inflation rate has fueled market expectations for interest rate cuts by the Federal Reserve.

Investors no longer seem to have doubts and are assigning a 91% implied probability that rate cuts will begin as early as September 2024.

The upcoming Producer Price Index (PPI) inflation report, scheduled for release on Friday at 8:30 a.m. ET, will be crucial in determining whether producer price trends can continue to support rate-cut expectations or temper the optimism.

June PPI Preview: What Economists Expect

• Producer prices in June are expected to rise 0.1% on the month versus an unexpected 0.2% decline in May, according to economist consensus estimates, as tracked by TradingEconomics.
• On an annual basis, the PPI inflation is expected to accelerate from 2.2% to 2.3%.
• Excluding food and energy, core PPI is expected to advance by 0.2% month-over-month, accelerating from the previous flat reading.
• Annually, core producer prices are set to rise by 2.5%, up from 2.3% in May. That would mark the highest annual core producer inflation rate since August 2023.

5 ETFs To Watch Friday

On Thursday, traders favored markets poised to gain from future rate cuts, investing in sectors that could benefit from reduced borrowing costs, while penalizing assets that had already heavily discounted expectations of monetary policy shifts.

The producer inflation data will be pivotal in evaluating if this market momentum will persist.

Among Thursday’s top-performing exchange-traded funds, we can definitely mention:

• SPDR Homebuilders ETF XHB rallying 6.1%
• Invesco Solar ETF TAN rising 4.4%
• SPDR S&P Regional Banking ETF KRE up 4.2%
• iShares Russell 2000 ETF IWM up 3.6%
• VanEck Gold Miners ETF GDX up 2.9%

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Image created using artificial intelligence via Midjourney.