• U.S. equity markets were mixed Monday ahead of a busy week of corporate earnings season and key inflation data expected to show the highest rate of consumer inflation in four decades.
• Following gains of 1.5% last week, the S&P 500 finished lower by 0.4% today while the tech-heavy Nasdaq 100 slumped 0.8%. The Mid-Cap 400 finished flat while the Small-Cap 600 edged out gains of 0.2%.
• Real estate equities were mixed ahead of a busy week of REIT and homebuilder earnings reports as the Equity REIT Index finished lower by 0.2% today with 8-of-19 property sectors in positive-territory.
• Mall REIT Simon Properties (SPG) kicks off a busy week of real estate earnings season this afternoon. Simon nearly doubled in value last year even as a trio of smaller mall REITs were in-and-out of bankruptcy.
• The busy week of earnings season is highlighted by 82 S&P 500 companies and results from more than two dozen REITs. We'll have full coverage of REIT earnings for Hoya Capital Income Builder members.

Income Builder Daily Recap

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U.S. equity markets were mixed Monday ahead of a busy week of corporate earnings season and a key inflation report that is likely to show the highest rate of consumer inflation in over four decades. Following gains of 1.5% last week, the S&P 500 finished lower by 0.4% today while the tech-heavy Nasdaq 100 slumped 0.8%. The Mid-Cap 400 finished flat while the Small-Cap 600 eeked out gains of 0.2%. Real estate equities were mixed ahead of a busy week of REIT and homebuilder earnings reports as the Equity REIT Index finished lower by 0.2% today with 8-of-19 property sectors in positive territory while the Mortgage REIT Index gained 0.3%.

As discussed in our Real Estate Weekly Outlook, equity markets are coming off their second-straight week of gains as relatively solid employment data and strong corporate earnings results - with some exceptions - have eased jitters over rising rates and slowing economic growth. Eight of the eleven GICS equity sectors were lower on the day, dragged on the downside by several mega-cap technology names including Meta Platforms (FB), Microsoft (MSFT), and Alphabet (GOOG). Homebuilders and the broader Hoya Capital Housing Index were among the outperformers today ahead of results tomorrow morning from Taylor Morrison (TMHC).

While the earnings calendar remains busy with 82 S&P 500 companies reporting results, the economic calendar slows down a bit in the week ahead with the major report of the week coming on Thursday when the BLS will report the Consumer Price Index for January which is expected to show the highest rate of inflation since 1982. We'll also be watching Michigan Consumer Sentiment data on Friday which sunk to the lowest level in ten years in January amid lingering concerns over inflation.

Equity REIT Daily Recap

Last week, we published REIT Earnings Preview: Dividend Hikes And 2022 Outlook. Highlights of this week's earnings slate include mall REITs Simon Properties (SPG) and Macerich (MAC), net lease REITs W.P. Carey (WPC) and National Realty (NNN), and shopping center REITs Regency Centers (REG), Kimco (KIM), and Federal Realty (FRT). We'll continue to provide real-time coverage with our Earnings QuickTake posts for Hoya Capital Income Builder members and will publish follow-up articles summarizing our thoughts and analysis throughout earnings season.

Malls: Three Mall REITs that survived the pandemic - Simon (SPG), Tanger (SKT), and Macerich (MAC) - roughly doubled in value last year on signs of stabilizing fundamentals. Mall REITs reported solid third-quarter results, highlighted by significant guidance increases. Simon Property, which hiked its dividend four times in 2021, now sees FFO within 5% of pre-pandemic levels but the other REITs are still at least another year away from a full recovery. We're focused on leasing spread this earnings season - which remained weak last quarter despite improving NOI and FFO trends - and want to see rental rates stabilize before we can officially call the bottom to fundamentals.

Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, residential finished the day higher by 0.3% while commercial mREITs advanced 0.2%. We'll hear reports from nearly a dozen mREITs in the week ahead including KKR Real Estate (KREF), New Residential (NRZ), and Apollo Commercial (ARI) on Tuesday. Last week, we published Mortgage REITs: High Yield Opportunities & Risks which discussed our updated sector outlook and previewed fourth-quarter earnings season. The average residential mREIT pays a dividend yield of 10.52% while the average commercial mREIT pays a dividend yield of 7.40%.

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Disclosure: Hoya Capital Real Estate advises two Exchange-Traded Funds listed on the NYSE. In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Index definitions and a complete list of holdings are available on our website.

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.