Deep Freeze • Rates Jump • REIT Earnings
U.S. equity markets retreated from all-time-highs today as interest rates and inflation expectations jumped to mid-pandemic highs amid a Southern 'Deep Freeze' that disrupted energy production.
Following gains of 1.3% last week, the S&P 500 finished lower by 0.1% today while the Dow Jones Industrial Average finished higher by 62 points.
Real estate equities, along with most yield-sensitive sectors, were under pressure today ahead of a jam-packed week of earnings reports as the broad-based Equity REIT ETFs finished lower by 0.8%.
Prison REIT GEO Group (GEO) dipped nearly 3% after reporting this morning that it expects that operations will continue to be negatively impacted from COVID-19's and from the Biden administration's shift away from private prisons.
Sunbelt-focused Apartment REIT NexPoint Residential (NXRT) finished higher by nearly 4% after it reported the strongest full-year revenue and NOI growth out of any of the apartment REITs to report results thus far.
Real Estate Daily Recap
U.S. equity markets retreated from all-time-highs today as interest rates and inflation expectations jumped to mid-pandemic highs amid a Southern 'Deep Freeze' that disrupted energy production. Following gains of 1.3% last week, the S&P 500 ETF (SPY) finished lower by 0.1% today while the Dow Jones Industrial Average (DIA) finished higher by 62 points. Real estate equities, along with most yield-sensitive sectors, were under pressure today ahead of a jam-packed week of REIT earnings reports as the broad-based Equity REIT ETFs (VNQ) finished lower by 0.8% with 15-of-19 property sectors in negative territory while the Mortgage REIT ETFs (REM) gained 1.7%.
Eight of the eleven GICS equity sectors finished in negative territory today, led to the downside by the yield-sensitive Utilities (XLU) and Real Estate (XLRE) sectors after the 10-Year Treasury Yield (IEF) jumped 10 basis points, closing at 1.30% as surging energy prices pushed inflation expectations to the highest levels since last March. Bitcoin (BTC-USD), which has become an "inflation proxy" of sorts, was also back in the headlines today after trading above 50,000 for the first time. As discussed in our Real Estate Weekly Outlook, U.S. equity markets entered the week at all-time-highs, propelled by a historically strong slate of corporate earnings, encouraging coronavirus trends, and economic data showing muted inflationary pressure in early 2021.
In addition to the frenetic week of earnings, we have a jam-packed slate of economic data in the holiday-shortened week ahead. On Wednesday, we'll see NAHB Homebuilder Sentiment data, the BLS Retail Sales report, and Producer Price Index data. On Thursday, we'll see Housing Starts and Building Permits for January which are expected to moderate slightly after reaching 12-year highs in late 2020. Then on Friday, we'll see Existing Home Sales for January as well as Manufacturing and Services PMI data. As usual, we'll also be watching the weekly Mortgage Applications and Jobless Claims data as well on Wednesday and Thursday, respectively.
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Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.