Stocks Slip • Yields Dip • Earnings Ahead
U.S. equity markets were lower Monday - reversing early-session gains - as concerns about another potential wave of COVID-related restrictions sent long-term Treasury yields dipping to the lowest level since February.
Following declines of 0.3% last week, the S&P 500 pulled back 0.2% today while the Mid-Cap 400 declined 0.4% and the Small-Cap 600 fell 0.2%. The 10-Year Yield dipped below 1.20%.
Real estate equities were mixed today ahead of the busiest week of earnings reports as the Equity REIT Index declined 0.2% with 12-of-19 property sectors in negative territory.
Notable REIT earnings reports this afternoon include Simon Property (SPG), Realty Income (O), SBA Communications (SBAC), Centerspace (CSR), and Omega Healthcare (OHI).
We have another busy slate of earnings reports and economic data in the week ahead, headlined by ADP Employment data on Wednesday, Jobless Claims on Thursday, and the BLS Nonfarm Payrolls report on Friday.
Real Estate Daily Recap
U.S. equity markets were lower Monday - reversing early-session gains - as concerns about another potential wave of COVID-related restrictions sent long-term Treasury yields dipping to the lowest level since February. Following declines of 0.3% last week, the S&P 500 pulled back 0.2% today while the Mid-Cap 400 declined 0.4% and the Small-Cap 600 fell 0.2%. Real estate equities were mixed today ahead of the busiest week of earnings reports as the Equity REIT Index declined 0.2% with 12-of-19 property sectors in negative territory while Mortgage REITs pulled back 0.6%.
As discussed in our Real Estate Weekly Outlook, we're likely to see a continuation of the high-stakes "tug-of-war" between countervailing inflationary and deflationary forces as threats of COVID-related restrictions could quickly halt or reverse economic progress over the last year. Seven of the eleven GICS equity sectors finished lower today, dragged on the downside by the economically sensitive Energy (XLE) and Materials (XLB) sectors. Homebuilders and the broader Hoya Capital Housing Index were among the outperformers today ahead of another busy week of earnings reports from builders and rental operators after results last week showed continued momentum behind the broader housing industry.
We have another busy slate of earnings reports and economic data in the week ahead, headlined by ADP Employment data on Wednesday, Jobless Claims on Thursday, and the BLS Nonfarm Payrolls report on Friday. Economists are looking for job growth of 900k in June, an acceleration from the 880k rate of job growth in June while the unemployment rate is expected to tick down to 5.7%. We'll also see Construction Spending data on Monday and a flurry of Purchasing Managers Index ("PMI") data throughout the week.
Real Estate Earnings Updates
Last week, we published Beat & Raise: Earnings Halftime Report. The REIT earnings frenzy intensifies further in the week ahead with more than 100 REITs reporting Q2 results including the full-slate of mall and hotel REIT reports and results from most of the remaining small-cap REITs. As discussed in our Real Estate Earnings Preview, notable reports we'll be watching this afternoon are retail REITs Simon Property (SPG), Brixmor (BRX), and Kite Realty (KRG), net lease REIT Realty Income (O), cell tower REIT SBA Communications (SBAC), apartment REIT Centerspace (CSR), and skilled nursing REIT Omega Healthcare (OHI).
Industrial: Monmouth Industrial (MNR) finished slightly lower today after reporting Q2 results this morning that were slightly weaker than expectations - a rare "miss" for the red-hot industrial property sector. MNR reported that its AFFO was flat from last year, significantly underperforming its industrial REIT peers which have reported double-digit AFFO growth in Q2. MNR - which agreed in May to be acquired by Sam Zell-led Equity Commonwealth (NYSE:EQC) in an all-stock deal at 0.67 shares of EQC per share of MNR - didn't comment on the competitive bid from Starwood Capital.
Office: Alexander's (ALX) - whose primary tenant is Bloomberg LP - finished flat today after reporting results that were in line with expectations. Highwoods Properties (HIW) finished lower by about 1% despite boosting its dividend by 4.2% to $0.50 per share, one of just three office REITs that is currently paying a dividend above pre-pandemic levels. Last week, HIW boosted its same-store NOI and FFO guidance, underscoring the relative outperformance of Sunbelt-focused office REITs over the harder-hit urban office REITs. We'll hear results from Vornado (VNO) this afternoon.
Per our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished lower by 3.7% today and are now off by 3.9% this week. Commercial mREITs slipped 1.9% today and are now lower by 0.9% this week. As previewed in Mortgage REITs: High Yield Bargains, we heard earnings reports from 16 mREITs in the week ahead including results this afternoon from Ellington Mortgage REIT (EARN).
REIT Preferreds & Capital Raising
Per the REIT Preferreds & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished higher by 0.25% today, on average, and outperformed their respective common stock issues by an average of 0.98%. So far in 2021, REIT Preferred stocks are higher by 9.24% on a price return basis. The average REIT preferred pays a current yield of 5.98% and trades at a slight premium to par value.
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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.
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.