XLP, the Consumer Staples Select Sector SPDR ETF, enters mid-May with a notable shift underway: the bearish bet that built through late March and April is rapidly unwinding.
The clearest signal is in short interest. Shorts have covered aggressively — short interest as a percentage of the float has dropped from a peak near 19% in early April to 16.5% now, a decline of roughly 16% over the past month. The one-week move alone is nearly 9% lower. That unwind has accelerated in the past few sessions, with daily estimates falling from 36.6 million shares on May 7 to 31.7 million by May 12. Whatever drove the defensive-hedge or macro-overlay short into XLP through the April turbulence, those positions are being reduced at pace.
The borrowing landscape tells a tighter story than the short-level headline suggests. Availability has been fully consumed — every share in the lending pool is currently lent out, a condition that has persisted for the majority of the past two weeks. That is the tightest the borrow market has been all year for this ETF. Cost to borrow has also crept up roughly 10% over the past week to 0.81%, though in absolute terms that remains inexpensive for an ETF of this size. The combination — shorts covering, yet availability at zero and costs edging up — points to a lending pool that is still under pressure even as gross short interest declines. The ORTEX short score holds steady at 68, within a narrow band for the past two weeks, consistent with a market that regards XLP as meaningfully shorted but no longer building.
Options traders, meanwhile, are less hedged than they were a month ago. The put/call ratio is running at 5.3, well below April's readings which pushed above 8 during the peak risk-off period. The 20-day average is 5.7, placing the current reading slightly below the norm — a mild softening of defensive positioning. Notably, the 52-week high on the PCR is 11.4, reached during last month's stress episode. The current level represents a material retreat from that extreme. In ETF options, a PCR above 5 still reflects structurally heavy put usage, consistent with the role XLP plays as a portfolio hedge for institutional holders. The z-score of -0.52 confirms the recent drift below average, but the absolute level is still elevated compared to a typical equity.
Consumer staples as a sector has seen near-neutral ETF fund flows over the past month — roughly -$25 million net, the smallest net outflow of any sector category. That near-balance reflects the dual role the space plays: flight-to-quality destination when risk appetite fades, but also a sector investors rotate out of when confidence returns. With broader markets recovering ground following April's tariff-driven volatility, the marginal dollar has been moving back into cyclicals and technology (which attracted over $109 billion net in the period). Staples have neither attracted fresh buying nor seen aggressive redemptions — a holding pattern. Top holders are concentrated in advisory and brokerage platforms, with Managed Account Advisors LLC at nearly 7% of shares and UBS Asset Management building its position by over 1.2 million shares in the December quarter.
The price action corroborates the shift in sentiment. XLP closed at $84.44 on May 12, up 1.3% on the day and gaining 2.5% over the past month. The ETF has quietly outperformed on a one-month basis while the short book retreated, suggesting the covering has contributed to the grind higher. The next focal point is whether that short reduction continues toward the lower levels seen in early 2026 — or stabilises here as a residual hedge position against renewed macro uncertainty.
See the live data behind this article on ORTEX.
Open XLP on ORTEX →ORTEX Market Intelligence content is generated by AI from a snapshot of ORTEX's proprietary data. Content is informational only and does not constitute investment advice.
