Upbeat CPI Lifts Market Sentiment, Small Caps Remain Bullish

The latest U.S. data releases showed April CPI and retail sales cooled, with the CPI report prompting markets to price in a faster pace of Fed rate cuts this year.

Options market data suggested a continued positive outlook for the S&P 500, though longer-dated put buying remained. Upside room kept expanding in QQQ, with expectations for a rally over 1.3% priced in by May 20 expiration. For small-caps, bullish flows continued in the Russell 2000, with expectations for the index to hold above 210 through June 21.

Details:

The $SPDR S&P 500 ETF Trust(SPY)$ saw open call interest rise 0.9% over the past 5 days. Open put contracts increased 1.7% over the same period.

For call options, investors sold the most $SPY 20240515 529.0 CALL$  with a 529 strike, adding 13,000 contracts. This implies expectations capping upside in SPY below 1.1% by May 15 expiration.

For put options, the most bought was the $SPY 20240719 498.0 PUT$  with a 498 strike, adding 36,000 contracts. This signals expectations for a decline over 4.7% in SPY by July 19 expiration.

The $Invesco QQQ(QQQ)$ saw open call interest rise 3.2% over the past 5 days. Open put contracts increased 1.5% over the same period.

For call options, investors bought the most $QQQ 20240520 453.0 CALL$  with a 453 strike, adding 25,000 contracts. This suggests expectations for a rally over 1.5% in QQQ by May 20 expiration.

For put options, investors sold the most $QQQ 20240515 440.0 PUT$  with a 440 strike, adding 10,000 contracts. This implies expectations capping downside in QQQ below 1.3% by May 15 expiration.

The $iShares Russell 2000 ETF(IWM)$ saw open call interest rise 3.1% over the past 5 days, while open put contracts increased 1.1% over the same period.

For call options, investors bought the most $IWM 20240621 210.0 CALL$  with a 210 strike, adding 25,000 contracts. This signals expectations for a 2.5% rally in IWM by June 21 expiration.

For put options, investors heavily sold the $IWM 20240621 210.0 PUT$  with a 210 strike, adding 23,000 contracts. This implies expectations for IWM to hold above 210 by June 21 expiration.