Existing-home sales in August buckled under pressure from higher mortgage rates. New home sales, a bright spot in an overall dreary housing market, might not be immune.
With data expected this week on August’s new home sales, investors will get a read on whether rising mortgage rates will continue to slam home builder stocks as they did recently.
Existing-home sales in August dropped for the third straight month to a seasonally-adjusted annual rate only 1% higher than its recent 12-year low, set in January. Mortgage rates are the likely culprit: the average 30-year fixed mortgage rate rose above 7% in mid-August before ascending to its highest level in more than 20 years.
Sales activity looks unlikely to have rallied in September: Mortgage rates measured by
have remained above 7% so far this month, at a recent 7.19%. One leading indicator of future sales, the volume of applications for home purchase loans, has remained well below year-ago levels this month, according to Mortgage Bankers Association data. “As homebuyers continue to face higher rates and limited for-sale inventory, which have made purchase conditions more challenging,” Joel Kan, the trade group’s deputy chief economist, said in a statement last week.
Should the bond market reaction to expectations of fewer rate cuts in 2024 hold, this week’s Freddie Mac survey will likely move higher: the 10-year Treasury yield, with which mortgage rates often move, reached its highest level since 2007 on Thursday. Rocket Mortgage, a large mortgage originator, was quoting rates at 7.63% on Friday morning.
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Mortgage rates could reach 8% in the short-term, National Association of Realtors chief economist Lawrence Yun said last week. That could put further pressure on existing-home sales, driving them to a new cyclical low, he said.
Shares of home builders, who had been the beneficiaries of the unusual housing market dynamic created by higher rates, have fallen recently as mortgage rates have risen. Earlier this year, builders stepped in to fill the void created by homeowners who have stayed put thanks to their ultralow mortgage rates. New home sales, as a result, soared: the metric rose as much as 32% above year-ago levels in July to its highest seasonally-adjusted annual rate since February 2022.
But mortgage rates’ recent rise has shaken confidence that the trend can continue: builder sentiment measured by the National Association of Home Builders turned negative earlier this month, while single-family housing starts in August slumped about 4% from the month prior.
Economists expect sales of new homes to have fallen in August, too: consensus estimates compiled by
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expect the government’s measure of contract signings to buy a new home to drop 2% from July, to a seasonally-adjusted annual rate of 700,000. The data is expected Tuesday at 10 a.m.
Economists at
the government-sponsored enterprise that buys mortgages from loan originators in the secondary market, expect sales of new homes to slow in the fourth quarter, and in the first half of 2024. The winter months are typically cooler seasonally, but the higher cost of buying a home—a combination of higher mortgage rates and prices—will add further pressure.
Fannie Mae expects a mild recession next year, says Doug Duncan, Fannie Mae’s chief economist, which would also weigh on sales. The economists expect the average mortgage rate to end 2023 at 7.1%, and fall to 6.3% by the end of 2024 as job losses rise and the economy softens.
But all hope is not lost for home builder stocks. “As the easy money has been made, a close inspection of homebuilding points to a fairly decent backdrop for the industry, supported by favorable credit spreads, elevated demand, and low inventory,” Cirrus Research strategist Georgiana Fung and Director of Research Satya Pradhuman wrote in a Sept. 21 note titled “Homebuilders—Buy the Dip!”
”Although mortgage rates have risen rapidly in response to the aggressive Fed rate hikes, the current pause and even the expectation of a reversal in policy should shine a ray of light on the housing market,” they wrote, highlighting
(ticker: PHM) and
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(MTH) as small- and mid-cap ideas. The companies’ shares were down 3.1% and 4.8% last week, respectively, but up about 62% and 33% so far this year.
Write to Shaina Mishkin at shaina.mishkin@dowjones.com
Published: Sept. 21, 2023 at 6:32 a.m. ET
Shares of Tata Consultancy Services Ltd. 532540 inched down 0.63% to 3,583.95 Indian rupees Thursday, on what proved to be an all-around dismal trading session for the stock market, with the S&P BSE Sensex Index 1 falling 0.85% to 66,230.24.
Tata Consultancy Services Ltd. closed 41.05 rupees below its 52-week high (3,625.00 rupees), which…
Shares of Tata Consultancy Services Ltd.
532540
inched down 0.63% to 3,583.95 Indian rupees Thursday, on what proved to be an all-around dismal trading session for the stock market, with the S&P BSE Sensex Index
1
falling 0.85% to 66,230.24.
Tata Consultancy Services Ltd. closed 41.05 rupees below its 52-week high (3,625.00 rupees), which the company reached on September 20.
The stock underperformed when compared to some of its competitors Thursday, as MphasiS Ltd.
MPHASIS
rose 0.22% to 2,488.10 rupees and Wipro Ltd.
WIPRO
fell 0.27% to 428.95 rupees.
Trading volume (103,196) eclipsed its 50-day average volume of 89,978.
Editor’s Note: This story was auto-generated by Automated Insights, an automation technology provider, using data from Dow Jones and FactSet. See our market data terms of use.
AutoZone easily beat earnings and sales estimates for its fiscal fourth quarter but the stock was falling after sales in the company’s domestic commercial division came up short.
AutoZone (ticker: AZO) posted fourth-quarter earnings of $46.46 a share, rising from a year ago and beating Wall Street’s estimate of $45.17.
Net sales for the…
easily beat earnings and sales estimates for its fiscal fourth quarter but the stock was falling after sales in the company’s domestic commercial division came up short.
(ticker: AZO) posted fourth-quarter earnings of $46.46 a share, rising from a year ago and beating Wall Street’s estimate of $45.17.
Net sales for the automotive replacement parts maker were $5.69 billion, also climbing from the year-ago quarter and beating expectations of $5.61 billion. But total domestic commercial sales were $1.499 billion, below the $1.55 billion analysts had forecast.
Same-store sales for the quarter rose 4.5%, falling from 7.1% a year ago but higher than the 2.4% jump analysts had expected.
“While we started this quarter slowly, we saw improvements in the back half of our quarter,” said CEO Bill Rhodes in the earnings release. “Despite lower-than-expected growth in domestic Commercial, we believe that the initiatives we have in place and are implementing will drive stronger growth in fiscal 2024.”
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AutoZone stock fell 2.2% to $2,467 in premarket trading. Coming into Tuesday’s session, shares have gained 2.3% this year.
Write to Emily Dattilo at emily.dattilo@dowjones.com
Published: Sept. 13, 2023 at 2:48 a.m. ET
By Ian Walker
Redrow has reported a 60.6% rise in fiscal 2023 pretax profit as the average home selling price rose over the period, and re-introduced year-ahead guidance that is much lower.
The London-listed home builder made a pretax profit for the year ended July 2 of 395 million pounds ($493.5 million) compared with GBP246 million for the…
By Ian Walker
Redrow has reported a 60.6% rise in fiscal 2023 pretax profit as the average home selling price rose over the period, and re-introduced year-ahead guidance that is much lower.
The London-listed home builder made a pretax profit for the year ended July 2 of 395 million pounds ($493.5 million) compared with GBP246 million for the comparable period a year earlier.
Revenue for the period was GBP2.13 billion compared with GBP2.14 billion.
The company said that it expects to report pretax profit for fiscal 2024 of between GBP180 million and GBP200 million, and for revenue to be between GBP1.65 billion and GBP1.7 billion.
It sold 5,436 homes in the year compared with 5,715 for the comparable period. The average selling price of private home completions increased by 8% and that of affordable homes by 5% on those in 2022 due to house price inflation and product mix.
The average private reservation rate per week for the year was 0.46 compared to 0.68 in 2022 and 0.34. Sales per outlet per week for the first 10 weeks of the new financial year were 0.34 compared with 0.61 for the same period a year ago.
The total order book at the year end stood at GBP850 million.
“Following the macroeconomic volatility of the last financial year, as we go into 2024 the market remains challenging and uncertain. However, we believe we are well positioned to respond to the market as it develops,” Nonexecutive Chairman Richard Akers said.
The board has declared a final dividend of 20.0 pence a share taking the total payout for the year to 30.0 pence compared with 32.0 pence, in line with the board’s policy of three times dividend cover.
Write to Ian Walker at ian.walker@wsj.com
Published: Sept. 11, 2023 at 3:40 a.m. ET
By Christian Moess Laursen
Shares in Bushveld Minerals rose as much as 21% after the company said investment fund Southern Point Resources will invest up to $77.5 million in the company.
At 0723 GMT, shares were up 0.23 pence at 2.25 pence.
The…
By Christian Moess Laursen
Shares in Bushveld Minerals rose as much as 21% after the company said investment fund Southern Point Resources will invest up to $77.5 million in the company.
At 0723 GMT, shares were up 0.23 pence at 2.25 pence.
The South Africa-focused vanadium miner said Monday that the two parties have signed a binding term sheet for a cumulative investment of $69.5 million to $77.5 million.
Under the terms, Bushveld will receive an interim working capital facility of 150 million South African rand ($7.8 million) to expand production at its Vanchem vanadium processing plant.
Additionally, the investment fund will buy a 50% stake in Bushveld’s subsidiary that owns Vanchem as well as its 64% equity interest in the subsidiary that owns the Mokopane project for a total of around $25 million.
Southern Point Resources will buy up to $12.5 million worth of equity in Bushveld, although the number of shares to be subscribed for won’t exceed 29.9%, Bushveld said.
The rest of the investment is in relation to a three-year marketing and sales appointment of SPR, as well as a potential future investment into Vanchem by SPR.
Write to Christian Moess Laursen at christian.moess@wsj.com
After a decade of near-zero interest rates, investors no longer need to look far when hunting for yield. And bonds aren’t the only game in town.
John Rekenthaler, director of research for Morningstar Research Services, points out that investors have piled into intermediate- and long-term bond funds despite their feeble returns.
“Intermediate-term funds are in the red over the trailing one-, two-, and three-year periods, and are barely positive for the year to date,” he said in a note. “Long funds have fared even worse, being down in 2023 as well.”
That raises the question: What is better than bonds, and where else can investors find robust returns?
“We’ve moved from an environment where income and yield was scarce, to now where it’s far more bountiful, and therefore investors don’t have to make a lot of risky choices to capture income,” said Michael Arone, chief investment strategist at
Global Advisors.
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High on the shopping list: preferred stocks, which combine elements of stocks and bonds in one investment.
“Preferreds continue to be an attractive space for investors who are trying to toe the line between bondlike features, which is stable, fixed dividend payments, and equity-like appreciation,” he said. “Preferreds do a good job of balancing those two items.”
Treasury bills are still paying above 5%, but with a preferred stock, investors get an investment-grade security that yields 6.5%—so solid income—without taking on too much credit risk, said Arone. “To us, that’s a very attractive proposition in today’s market.”
State Street’s offering is the exchange-traded fund
SPDR ICE Preferred Securities ETF
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(ticker: PSK), which yields 6.56%.
Short-term T-bills are still attractive—the key is to hold the bills to maturity, rather than trying to bet on the direction of rates over the long term. The
SPDR Bloomberg 1-3 Month T-Bill ETF
(BIL) yields 4.1%.
ETFs that focus on dividend-paying stocks offer another avenue for income. Here investors can look for ETFs that invest in so-called dividend aristocrats, or companies in the
index that have a history of increasing dividends for 25 consecutive years or more.
Among the ETFs that invest in such stocks is
ProShares S&P 500 Dividend Aristocrats ETF
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(NOBL), an $11.65 billion fund that tracks the S&P 500 Dividend Aristocrat Index. The yield is 1.95% and year to date total return is 4.43%.
The yield on dividend stocks may not appear compelling at first blush, but there’s a long-term reason to consider adding them to your portfolio. “This is stock investing, not bonds, and therefore you get the opportunity for price appreciation,” Arone said. “And companies that exhibit these characteristics reward investors over the long term with outsize returns or better returns than bonds.”
Investors who are expecting a slowdown in the economy and a possible recession should have high-quality companies in their stock portfolio and dividend growers tend to be those high-quality companies, he added.
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This year investors have flocked to money-market funds—mutual funds that invest in cash and low-risk securities. One advantage of these cash-like instruments is that it is easy to move money into them from mainstream brokerage accounts.
Keep an eye on fees when shopping around. The popular Fidelity Money Market Fund (SPRXX), with a yield of 5.04%, has an expense ratio of 0.42%, while the Vanguard Federal Money Market Fund (VMFXX), yielding 5.27%, only charges 0.11%.
One caveat: Arone said investors should understand the liquidity, interest-rate risk, credit risk, and potential volatility associated with money-market funds. “Historically when investors have gotten themselves in trouble is when the yields are really juicy and attractive.,” he cautioned.
Write to Lauren Foster at lauren.foster@barrons.com
Published: Sept. 7, 2023 at 1:52 p.m. ET
By Josh Beckerman
Shares of Sigma Additive Solutions rose 32% Thursday after it reported letters of intent to buy travel technology company NextTrip Holdings and sell intellectual property assets related to its quality assurance software for 3-D printing to an unnamed strategic buyer.
The stock recently traded at 29 cents and is down 28% for…
By Josh Beckerman
Shares of Sigma Additive Solutions rose 32% Thursday after it reported letters of intent to buy travel technology company NextTrip Holdings and sell intellectual property assets related to its quality assurance software for 3-D printing to an unnamed strategic buyer.
The stock recently traded at 29 cents and is down 28% for the year to date.
Sigma said it will buy 100% of NextTrip in exchange for shares constituting 19.99% of its outstanding common stock plus additional shares upon the achievement of post-closing milestone earnouts. It said the total transaction will have a starting valuation of about $48 million if all milestones are earned.
The transactions are expected to be completed in the fourth quarter, subject to conditions including negotiation and execution of a definitive NextTrip acquisition agreement. Sigma is expected to change its name to NextTrip.
Write to Josh Beckerman at josh.beckerman@wsj.com
Published: Sept. 6, 2023 at 6:32 a.m. ET
Shares of Tata Consultancy Services Ltd. 532540 inched up 0.06% to 3,429.85 Indian rupees Wednesday, on what proved to be an all-around great trading session for the stock market, with the S&P BSE Sensex Index 1 rising 0.15% to 65,880.52.
Tata Consultancy Services Ltd. closed 145.15 rupees short of its 52-week high (3,575.00 rupees), which…
Shares of Tata Consultancy Services Ltd.
532540
inched up 0.06% to 3,429.85 Indian rupees Wednesday, on what proved to be an all-around great trading session for the stock market, with the S&P BSE Sensex Index
1
rising 0.15% to 65,880.52.
Tata Consultancy Services Ltd. closed 145.15 rupees short of its 52-week high (3,575.00 rupees), which the company achieved on February 16.
The stock outperformed some of its competitors Wednesday, as MphasiS Ltd.
MPHASIS
fell 1.83% to 2,475.75 rupees and Wipro Ltd.
WIPRO
fell 0.59% to 429.30 rupees.
Trading volume (36,225) remained 52,511 below its 50-day average volume of 88,736.
Editor’s Note: This story was auto-generated by Automated Insights, an automation technology provider, using data from Dow Jones and FactSet. See our market data terms of use.
Published: Aug. 30, 2023 at 5:11 a.m. ET
By Kosaku Narioka
Industrial & Commercial Bank of China said Wednesday that first-half net profit rose 1.2% from a year earlier, thanks partly to gains from bond investments.
The Chinese bank said net profit rose to 170.11 billion yuan ($23.36 billion) for the six months ended June 30 from CNY168.11 billion a year earlier. That missed the…
By Kosaku Narioka
Industrial & Commercial Bank of China said Wednesday that first-half net profit rose 1.2% from a year earlier, thanks partly to gains from bond investments.
The Chinese bank said net profit rose to 170.11 billion yuan ($23.36 billion) for the six months ended June 30 from CNY168.11 billion a year earlier. That missed the estimate of CNY176.55 billion from a poll of analysts by Visible Alpha.
First-half net trading income more than doubled to CNY9.87 billion from CNY4.635 billion a year earlier, mainly due to an increase in bond investment income. Net gains on financial investments also climbed 76% to CNY12.66 billion, mainly as a result of higher valuation of bonds and funds. Income tax expense decreased from a year earlier.
Meanwhile, net interest income decreased 3.9% from a year earlier to CNY336.99 billion, as loan interest rates in the country have fallen in recent quarters. Net fee and commission income also dropped 3.4% to CNY73.465 billion.
First-half impairment losses on assets fell 8.7% from a year earlier to CNY122.255 billion. Its non-performing loan ratio stood at 1.36% at the end of June, compared with 1.38% at the end of December.
Write to Kosaku Narioka at kosaku.narioka@wsj.com
Published: Aug. 29, 2023 at 4:16 p.m. ET
By Denny Jacob
HP revenue declined in the latest quarter, reflecting ongoing tepid spending from the company’s consumer and commercial customers.
The computer and printer maker logged earnings of $766 million, or 76 cents a share, for the third quarter ended July 31, compared with $1.12 billion, or $1.08 a share, a year earlier. Adjusted earnings…
By Denny Jacob
HP revenue declined in the latest quarter, reflecting ongoing tepid spending from the company’s consumer and commercial customers.
The computer and printer maker logged earnings of $766 million, or 76 cents a share, for the third quarter ended July 31, compared with $1.12 billion, or $1.08 a share, a year earlier. Adjusted earnings were 86 cents a share, matching analysts’ estimates.
Revenue declined nearly 10%, to $13.2 billion, from $14.65 billion. Analysts polled by FactSet expected $13.38 billion.
Personal systems revenue declined 11%, to $8.93 billion, from a year earlier, while print revenue tumbled 7%, to $4.26 billion, during the same period.
“We think the pricing recovery that we were expecting a quarter ago is not going to happen as much as we were expecting,” Chief Executive Enrique Lores said in an interview. He added that the company estimates that inventories remain high at an industry level, which continues to put pressure on pricing.
On the printing side, Lores said the two main drivers affected its home and industrial segments. A slowdown in demand on the home segment reflected a major impact in the quarter, while on the industrial side HP has seen the impact of enterprises being more cautious in terms of their investment, said Lores. Its office segment was flat year over year, he added.
Write to Denny Jacob at denny.jacob@wsj.com