Live Markets: Take a look at REITs as we head into 2022, BofA suggests
09/12/2021 17:25
* Major U.S. indexes dip; small caps weaker; banks,
transports
green
* Energy weakest major S&P sector; healthcare leads gainers
* Dollar up; gold, crude, bitcoin fall
* U.S. 10-Year Treasury yield declines to ~1.49%
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TAKE A LOOK AT REITS AS WE HEAD INTO 2022, BOFA SUGGESTS
(1225 EST/1725 GMT)
Investors cautious about inflation, future gains in the
stock market and higher interest rates next year ought to take a
look at REITs, BofA Global Research says in a note out on
Thursday.
High quality real estate investment trusts can provide
inflation protected cash flows, while potentially beating and
raising guidance, analyst Jeffrey Spector writes in his note.
"Our work inside shows REITs can underperform ahead of the
first Fed hike but can actually outperform if rates are rising
alongside a growing economy," Spector writes.
The S&P 500 real estate index .SPLRCR has surged 34% in
2021, well ahead of the S&P 500's .SPX 25% rise. That rally
has occurred even amidst uncertainty about the long-term effects
of the coronavirus pandemic on demand for office and
brick-and-mortar retail space.
Industrial, residential and self-storage are the three areas
Spector favors heading into next year. His top picks include
Alexandria Real Estate Equities ARE.N , Extra Space Storage
EXR.N , Regency Centers REG.O and Rexford Industrial Realty
REXR.N .
"While there are risks around core growth slowing in 2022,
these sectors continue to surprise to the upside," Spector
writes.
(Noel Randewich)
*****
S&P FLASHES CAUTION SIGNAL FOR LOWER-RATED U.S. TECH
COMPANIES (1201 EST/1701 GMT)
While good growth prospects are expected for the U.S.
technology industry over the next couple of years, S&P Global
Ratings said it was cautious about companies it rates in the
below-investment-grade level of B-minus.
In a report on Wednesday, the credit rating agency said
significant market liquidity has enabled those companies, along
with others, to increase their debt load to fund dividends,
mergers, and acquisitions.
About 40% of U.S. tech companies rated by S&P are in the
B-minus category.
S&P noted that plans by these companies to deleverage are
based on the continuation "of favorable economic conditions that
support business growth and access to capital markets that
enable flexibility to build and expand their offerings through
acquisitions to remain competitive."
"Market conditions will eventually turn, and we are closely
monitoring highly leveraged B-minus rated companies based on
patterns of companies we downgraded to CCC-plus or below," the
report said.
It added that over the next few years, the number of
companies upgraded from B-minus is expected to be with limited
due to "the absence of financial sponsors' incentives to lower
their financial risk tolerance, good growth trajectory in tech
sector that favors M&A transaction, as well as opportunistic
debt-financed dividends."
(Karen Pierog)
*****
JOBLESS CLAIMS WITH SEASONAL DECORATIONS (1052 EST/1552 GMT)
With the number of Americans filing new claims for
unemployment benefits dropping to its lowest level in more than
52 years last week, JPMorgan and Jefferies took a look.
With labor market conditions continuing to tighten amid an
acute shortage of workers, initial claims for state unemployment
benefits tumbled 43,000 to a seasonally adjusted 184,000 for the
week ended Dec. 4, according to the Labor Department. In
comparison economists polled by Reuters had forecast 215,000
applications for the latest week. urn:newsml:reuters.com:*:nL1N2ST1I6
"We think that filings are continuing to trend down over
time as the labor market keeps recovering. But we also think
that recent low levels of filings in the seasonally adjusted
data may be being exaggerated by the seasonal factors," wrote
JPMorgan economist Daniel Silver.
Also he wrote that "the tight labor market may be limiting
the amount of seasonal layoffs that take place around this time
of year relative to norms."
However, before seasonal adjustment he noted that initial
claims jumped 64,000 during the week ended December 4. Silver
reminds readers that the filings can be noisy from week to week,
pointing to the week ended Nov. 27 when seasonally adjusted
filings increased 38,000 to 1.992mn.
Also Jefferies money market economist Thomas Simons threw a
little caution on the data saying: "The labor market is very
strong, but not quite this strong."
Simons suggests the picture look better than it should due
to a Department of Labor methodology change for calculating
seasonal adjustment last summer to help it deal better with
larger numbers when claims were still in the millions.
So he writes, "the risk of even more extreme prints remains
high throughout the next month and a half," and suggests that
the Labor department will "need to address this seasonal
adjustment issue soon" and that two prints in the last 3 weeks
with 1960s levels maybe motivate them to change their ways.
(Sinéad Carew)
*****
U.S. STOCKS MODESTLY RED IN EARLY TRADE (1003 EST/1503 GMT)
Wall Street's main indexes are modestly red in early trade
on Thursday after logging three straight days of gains. .N
With the U.S. 10-Year Treasury yield US10YT=RR coming back
under the 1.50% level, small caps .RUT are among weaker
indexes.
That said, with communication services .SPLRCL and tech
.SPLRCT roughly flat, the NYSE FANG+TM index .NYFANG is
posting a rise, and outperforming.
In any event, the S&P 500 .SPX is only around 0.3% shy of
its November 18 record close of 4,704.54.
All eyes are now on consumer prices index data due on
Friday. A hotter-than-expected reading could strengthen the case
for aggressive policy tightening ahead of the U.S. central
bank's meeting next week.
Here is where markets stand in early trade:
(Terence Gabriel)
*****
NASDAQ 100: BACK ON TRACK? (0900 EST/1400 GMT)
The Nasdaq 100 .NDX has roared back this week. In fact,
this index of the one hundred largest non-financial companies on
the Nasdaq is on track for its best week since early February.
This strength is coming just one week after the NDX suffered
a one-week slide of as much as 7.3%, and once again flirted with
its rising 20-week moving average (WMA):
Since being reclaimed in mid-April 2020, the 20-WMA has been
proving to be a resilient support for the NDX.
Over this period, and despite a number of intraweek
violations, the NDX has only ended below it once, in the week
ending October 30, 2020.
The index finished just 0.1% below this longer-term moving
average that week before then immediately vaulting higher the
following week. As a result, the moving average's one-week
rate-of-change did not turn negative at that time.
In fact, the 20-WMA has now not ticked down for 87-straight
weeks, which is its longest such run since a 126-week streak
from May 2016 to October 2018.
In any event, since mid-April 2020, all tests of the 20-WMA
have ultimately led to higher peaks and troughs, as the NDX has
steadily made new highs.
It now remains to be seen if this most recent flirtation
with the 20-WMA will lead to new highs, but the NDX ended
Wednesday only a little over 1% from its November 19 record
close, and only about 3% from its November 22 record intraday
peak. CME e-mini Nasdaq 100 futures NQcv1 are down modestly
ahead of Thursday's open.
A more decisive closing break of the 20-WMA than was seen in
late-October 2020, with the moving average then ticking down,
could signal a sea change in trend. urn:newsml:reuters.com:*:nL1N2ST0OJ
(Terence Gabriel)
*****
FOR THURSDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400
GMT - CLICK HERE: urn:newsml:reuters.com:*:nL1N2SU102
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NDX12092021 https://tmsnrt.rs/3pGp29f
earlytrade12092021 https://tmsnrt.rs/3oEKM69
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)