Tech Trouble | REITs Steady | Dividend Cut Or Increase?
Updated: Sep 10, 2020
U.S. equity markets ended extended their sell-off Tuesday with the major averages sliding into correction territory amid a sharp momentum reversal in large-cap technology stocks.
After snapping its six-week winning streak with declines of 2.3% last week, the S&P 500 ETF finished lower by another 2.7% today. The Dow Jones Industrial Average slid 632 points.
Real estate equities were again among the relative outperformers today amid the broader sell-off as the Equity REIT ETF (VNQ) finished lower by 1.3% today.
The pace of dividend cuts has slowed to a trickle in the equity REIT sector. This afternoon shopping center REIT Retail Properties of America (RPAI) announced a resumption of their previously suspended dividend at roughly a third of the pre-pandemic rate.
Fellow shopping center REIT Urstadt Biddle (UBA) announced earnings results, while also boosting their previously-reduced dividend. Despite the increase, the current payout is half the pre-pandemic rate.
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U.S. equity markets ended extended their sell-off Tuesday with the major averages sliding into correction territory amid a sharp momentum reversal in large-cap technology stocks. After snapping its six-week winning streak with declines of 2.3% last week, the S&P 500 ETF (SPY) finished lower by another 2.7% today while the tech-heavy Nasdaq 100 (QQQ) dipped another 4.8% following last week's declines off 3.1%. Real estate equities were again among the relative outperfomers today amid the broader sell-off as the Equity REIT ETFs (VNQ) finished lower by 1.3% today with 17 of 18 property sectors finishing in negative territory. The Mortgage REIT ETF (REM), meanwhile, higher by 0.1% after declining by 2.6% last week.
As discussed in our Real Estate Weekly Outlook, the "unofficial end" of summer has come with one final "splash" in its final days as volatility returned to U.S. equity markets following several months of relative tranquility. The recent sell-off - which has been largely isolated to the equity markets - has had a different and perhaps "healthy" feel to it compared to the sharp declines seen in March and April as the losses came despite an encouraging slate of employment data last week that showed a continued rebound in labor markets. In what we described as a "Robinhood shakeout," the highest-flying technology names have been among the hardest-hit this week while the "shutdown sensitive" sectors have generally been among the leaders. Commercial real estate (XLRE) and the Hoya Capital Housing Index were among the best-performing equity sectors on the day.
The economic calendar slows down in the holiday-shortened week after a frenetic slate of employment and housing data over the last two weeks. Inflation data highlights the slate of data with Producer Price Index data on Thursday and Consumer Price Index data on Friday. Inflation metrics showed signs of life in the prior month after most inflation metrics hit multi-decade lows in May and June. As usual, we'll be watching the weekly Mortgage data on Wednesday and Jobless Claims data on Thursday for signs that the housing and employment recovery can continue into early Autumn.
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