Macro

CPI Cools to 0.3%, Copper Soars on Squeeze, SPY ETF Breaks Out

CPI data boosts investor sentiment, copper hits new high amid short squeeze, signaling mixed market dynamics.

By Athena Xu

5/15, 12:55 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
Apple Inc.
Freeport-McMoRan, Inc.
Alphabet Inc.
SPDR S&P 500 ETF TRUST
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Key Takeaway

  • CPI data slightly cooler than expected, with headline CPI at 0.3% vs. 0.4% consensus, but core annualized CPI remains high at 3.6%.
  • Copper futures hit new highs due to a short squeeze, not economic demand; significant for investors in copper-related stocks like FCX and ETFs like XME and PDBC.
  • Positive early trade money flows in Alphabet Inc and SPDR S&P 500 ETF Trust; momo crowd buying gold and selling oil, smart money inactive.

Market Sentiment at Extremes

The SPDR S&P 500 ETF Trust is showcasing a breakout above the resistance zone, with an RSI at 100, indicating an extreme overbought level. This could either signal a strong upcoming up leg or a potential failure of the breakout. The sentiment is overwhelmingly positive, which at extremes, acts as a contrary indicator. Despite the strong technicals suggesting a 40% probability of breakout failure, the cooler-than-expected Consumer Price Index (CPI) data has investors elated. The headline CPI rose by 0.3% versus the 0.4% consensus, and the core CPI matched the 0.3% consensus. However, the annualized core CPI remains at 3.6%, above the Fed's 2% target. Goods inflation is decreasing due to overproduction in China, but services inflation remains sticky, impacting the largely consumer-based U.S. economy.

Retail Sales and Copper's Surge

Retail sales data indicates a consumer pullback, with headline retail sales at 0.0% against a 0.4% consensus, potentially affecting future earnings. Meanwhile, copper futures in New York hit a new high, driven not by economic boom but a vicious short squeeze, particularly affecting investors betting on artificial intelligence's demand for copper. This surge in copper prices is attributed to a scramble to divert metal to the U.S., highlighting a disconnect between copper's traditional economic indicators and current market dynamics.

Money Flows and Market Activity

Early trade money flows show positive movements in Alphabet Inc Class C and SPDR S&P 500 ETF Trust, with neutral flows in Apple Inc. The momo crowd is aggressively buying stocks, while smart money remains inactive. This pattern suggests a cautious approach, as smart money often sells into strength generated by momo crowd buying. In commodities, gold sees buying from the momo crowd, and oil reacts to a larger-than-expected draw in API crude inventories, indicating a sell sentiment in early trades.