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The Federal Open Market Committee Meeting Looms Large This Week

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The last uneventful FOMC meeting

This week features the FOMC (Federal Open Market Committee) meeting on Tuesday and Wednesday. It will be the last FOMC meeting before we start worrying about rate hikes. With the removal of the word “patient” at the March FOMC meeting, a rate hike possibility in June is now in play.

Of course, the Fed is going to be data driven in its decision-making. And, we do have some important economic data coming out this week, including the advance estimate of Q1 GDP (gross domestic product), personal income, personal spending, construction spending, and personal consumption expenditures. While the first Friday of the month is this week, the government seems to be holding off the “Employment Situation” report until next week.

We have earnings data as well, with some big REITs reporting. First will be mortgage REIT giant American Capital Agency (AGNC) on Monday, followed by retail REITs Macerich (MAC) and Realty Income Fund (O).

Finally, real estate investors will see the Case-Shiller Home Price Index and pending home sales data released.

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Economic data this week

Let’s look at a rundown of this week’s economic data.

Monday, April 27, 2015:

  • Markit US Composite PMI (purchasing managers’ index)
  • Markit US Services PMI
  • the Dallas Fed’s Texas Manufacturing Outlook Survey

Tuesday, April 28, 2015:

  • S&P Case-Shiller Home Price Index
  • consumer confidence index
  • Federal Reserve Bank of Richmond
  • Employment Cost Index revisions

Wednesday, April 29, 2015:

  • MBA (Mortgage Bankers Association) mortgage applications
  • GDP – Q1 2015, advance estimate
  • US Pending Home Sales Index
  • FOMC decision

Thursday, April 30, 2015:

  • initial jobless claims
  • Bloomberg Consumer Comfort Index
  • Employment Cost Index
  • personal income
  • personal spending
  • personal consumption expenditures
  • Chicago Purchasing Manager Index

Friday, May 1, 2015:

  • Markit US Manufacturing PMI
  • construction spending
  • ISM (Institute for Supply Management) Manufacturing Index
  • University of Michigan Consumer Sentiment Index

Earnings reports this week

Monday, April 27, 2015:

  • American Capital Agency (AGNC)

Wednesday, April 29, 2015:

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Impact on mortgage REITs

Real estate investment trusts, or REITs, such as MFA Financial (MFA) and Annaly Capital Management (NLY), will listen closely to American Capital Agency’s earnings— Annaly is the best comparison for AGNC—and will try to parse the FOMC statement. If the economic data are weak, then people will start thinking the Fed will stand pat in June.

Impact on the homebuilders

Builders like Lennar (LEN) and PulteGroup (PHM) will focus on the Case-Shiller Home Price Index and the pending home sales. Investors are becoming a bit more optimistic about the sector given the outperformance of the SPDR S&P Homebuilders ETF (XHB).

Investors interested in trading in the mortgage-REIT sector via an ETF should look at the iShares Mortgage Real Estate Fund (REM). Investors who are interested in making directional bets on interest rates should look at the iShares 20+ Year Treasury Bond ETF (TLT).

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