Mortgage real estate investment trusts often run counter to the status quo, with their stocks even benefiting from disappointing jobs data.
Tuesday proved no exception. With U.S. unemployment remaining stubbornly high, the latest jobs numbers became an immediate signal to investors that the central bank is unlikely to taper its mortgage-bond buying program or Treasury purchases.
If you're an economist this may be bad news, but for mREITs — a sector that benefits from Fed MBS intervention — it makes for a wonderful trading day.
While some investors remain bearish on the mREIT sector, bullish investors came out to play after unemployment data showed a stalling job market with only minor employment gains in September.
"Today’s job report confirmed that taper will not begin in 2013 and that an early 2014 wind down at best is the more likely scenario," explained FBR Capital Markets analyst Dan Altscher. The Fed has linked its eventual exit from MBS purchases to the nation's unemployment rate.
Altscher added, "From an mREIT stock perspective, it’s game on. It’s safe to own these stocks for the rest of this year and even a couple of months after because this group will provide book value stability and growth."
mREITs on the HW 30 — HousingWire’s exclusive list of mortgage-related stocks — posted impressive gains Tuesday.
For instance, American Capital Agency (AGNC) and Annaly Capital Management (NLY) recorded hefty gains, posting increases of 1.67% and 2.13%, respectively.
Additionally, private issuer dominator Redwood Trust (RWT) and Two Harbors Investment (TWO) closed out the day strong, up 1.07% and 1.14%.
All major indices ended higher, giving proof to investors that the central bank will continue its bond-buying program for the time being.
The Dow Jones Industrial Average climbed 75.46 points, finishing the day at 15,467,66, while the S&P 500 rallied 10.1 points, closing Tuesday at 1,754.67.
Finally, the Nasdaq finished out strong at 3,929.57, up 0.24%.
