• U.S. equity markets declined Monday as investors took positions ahead of a jam-packed week of corporate earnings reports, employment data, and the critical Federal Reserve interest rate decision.
• Entering the week with gains in three-of-four weeks to start the new year, the S&P 500 slipped 1.4% today while the tech-heavy Nasdaq 100 dipped more than 2%.
• Real estate equities were lower as well today as REIT earnings season starts to kick into gear. The Equity REIT Index declined 1.1% today while Mortgage REITs declined 1.6%.
• The main event of the week comes on Wednesday with the FOMC Interest Rate Decision in which the Fed is widely expected to raise rates by 25 basis points to bring the Fed Funds rate to a 4.75% upper-bound.
• Dynex Capital (DX) dipped about 5% after it kicked-off mortgage REIT earnings season this morning, reporting a 4% increase in its Book Value Per Share, but noting that its Earnings Available for Distribution - which excludes hedge gains - dipped more than expected.

Income Builder Daily Recap

U.S. equity markets declined Monday as investors took positions ahead of a jam-packed week of corporate earnings reports, employment data, and the critical Federal Reserve interest rate decision. Entering the week with gains in three-of-four weeks to start the new year, the S&P 500 slipped 1.3% today while the tech-heavy Nasdaq 100 dipped more than 2%. The Dow dipped 260 points - snapping a six-session winning streak. Real estate equities were lower as well today as REIT earnings season starts to kick into gear. The Equity REIT Index declined 1.1% today with all 18 property sectors in negative territory while the Mortgage REIT Index slipped 1.6%.

Ahead of the Fed rate decision on Wednesday, benchmark interest rates ticked slightly higher with the 10-Year Treasury Yield closing at 3.55% - up 3 basis points from its prior close. Crude Oil futures dipped 2% while Natural Gas prices fell to their lowest levels in nearly two years. Ten of the eleven GICS equity sectors finished lower today with Energy (XLE) and Technology (XLK) stocks dragging on the downside as corporate earnings season entered its busiest week. Over 100 companies representing roughly a third of the S&P 500’s market value will report results this week, highlighted by General Motors (GM), Pfizer (PFE), McDonald's (MCD), and Exxon (XOM) tomorrow.

The main event of the jam-packed week of economic data comes on Wednesday with the FOMC Interest Rate Decision in which the Fed is widely expected to raise rates by 25 basis points to bring the Fed Funds rate to a 4.75% upper-bound. Notably, market pricing indicates expectations of just one additional 25 basis point hike in March - peaking at a 5.0% rate - with rate cuts beginning by the end of this year. Sandwiched around the Fed's decision is a critical slate of employment data headlined by JOLTS data and ADP Payrolls on Wednesday, Jobless Claims data on Thursday, and the BLS Nonfarm Payrolls report on Friday. Economists expect job growth of roughly 185k in January and for the unemployment rate to tick higher to 3.6%. Average hourly earnings - a closely-watched metric in recent months - is expected to slow to a 4.3% year-over-year rate from 4.6%. We'll also be watching home price data earlier in the week via the Case Shiller Home Price Index for November which has declined in four-straight months.

Real Estate Daily Recap

Best & Worst Performance Today Across the REIT Sector

Today we published our REIT Earnings Preview on the Income Builder Marketplace. Real estate earnings season kicks into gear this week, and over the next month, we'll hear results from 175 equity REITs, 40 mortgage REITs, and dozens of housing industry companies. REITs enter earnings season with some momentum amid the recent moderation in interest rates and hopes of a 'softish' economic landing following a punishing year of stock price performance. How REITs are responding to this higher rate environment – both on the acquisitions and the financing side - will be closely-watched. REITs hunkered-down in 2022, but opportunities are becoming more plentiful and we see the non-traded REIT segment - headlined by Blackstone (BX) - as one area that may be "ripe for the picking" if investor redemptions continue. Full-year guidance will be the most closely watched metric, especially in the residential, retail, and office sectors given the wide range of expectations. We'll hear results this afternoon from Equity Lifestyle (ELS), Alexandria (ARE), and PotlatchDeltic (PCH).

Additional Headlines from The Daily REITBeat on Income Builder

• JMP initiated Independence (IRT) with a Market Perform rating
• Compass Point upgraded Federal Realty (FRT) to Buy from Neutral
• Compass Point downgraded Tanger Outlets (SKT) to Neutral from Buy

Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, mortgage REITs retreated today as earnings season kicked-off with residential mREITs declining 1.8% today while commercial mREITs fell 0.2%. Dynex Capital (DX) dipped about 5% after it kicked-off mortgage REIT earnings season this morning, reporting a 4% increase in its Book Value Per Share ("BVPS") to $14.73, but noting that its Earnings Available for Distribution ("EAD") - which excludes hedge gains - dipped more than expected. Notably, DX commented that it "expects that these hedge gains will be supportive of the dividend in 2023 and beyond even if net interest income and earnings available for distribution decline due to financing costs." We'll hear results from AGNC Investment (AGNC) this afternoon.

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