Ahead of tomorrow's PPI release, investors are adjusting short positions in utilities and consumer staples, signaling expectations of a potential surprise in PPI numbers that could impact sector performance.

The monthly Producer Price Index (PPI) will be released tomorrow. The actual PPI and forecast can vary by approximately 0.37% either way. This variation has the potential to impact sectors and the broader market.

The table shows the beta and correlation of market movements on PPI release days compared to the difference between the forecast and the actual PPI.

The sector most correlated with PPI variations is XLP (Consumer Staples), with a correlation of -0.71 and a beta of 0.97. This means that if the PPI deviates by 0.40%, the ETF is expected to move by 0.40%. The negative correlation and beta indicate that XLP tends to decline when the PPI is higher than expected.

Conversely, XLU (Utilities) has a beta of 0.48, meaning that the sector generally rises when the PPI is higher than expected, though to a lesser extent.

Bonds also experience price movements, with TLT having a beta of 0.71.

The short position in XLU (Utilities) has been increasing, while the position in XLP (Consumer Staples) has been decreasing. These movements could signal an expectation of a surprise downward shift in the PPI.

Utilities Short as % of Float

Consumer Staple Short as % of Float

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