Last week was a typically dull week after the jobs report
As a general rule, the week after the jobs report is pretty dull. There are few market-moving data points to work with, and given that earnings season is over, we don’t have much to focus on.
Monday had no economic data, and Tuesday had the JOLTs Job Openings report and the NFIB Small Business Optimism report. Both reports hit post-recession highs. On Thursday, we had the retail sales data, which came in disappointing. However, April’s data was revised upward. Finally, on Friday, we had the Producer Price Index.
Commercial REITs will be encouraged by economic strength
Commercial REITs in the retail space, like Simon Property (SPG) and General Growth Properties (GGP), will certainly be happy with the positive revision in retail sales. Office REITs like Vornado Realty Trust (VNO) will focus on the JOLTs jobs report, as job creation is necessary for them to start lowering vacancy rates.
Implications for mortgage REITs
Mortgage REITs, like Annaly (NLY) and American Capital (AGNC), are driven by interest rates, which have been in a tight trading range. Investors are becoming more comfortable with the idea that the Fed isn’t looking to raise rates too soon (people seem to have digested the possibility, although it’s probably unlikely, that the Fed will start hiking rates at the June 2015 FOMC meeting).
Implications for homebuilders
Homebuilders like PulteGroup (PHM) and D.R. Horton (DHI) didn’t have a lot to work with. For them, the JOLTS report was probably the most interesting, because we need job growth for homebuilding to really take off. For investors who were hoping for a big jump in homebuilding and seeing housing starts close to normalcy (starts around 1.5 million units per year), it looks like 2014 isn’t going to be the year that jump happens.