Week in Review: NFIB Small Business Optimism Index Fell

Last week, global equities rallied as oil prices rebounded. Bond yields rose by 11 basis points for the week. The earnings season is over. There are only a few stragglers left.

There’s usually light data the week after the jobs report. Last week wasn’t an exception. The most important data point was the NFIB Small Business Optimism Index. It showed deterioration, especially in hiring. Other than that, the highlight of the week was the European Central Bank’s meeting. It announced a slew of stimulus measures. However, bonds sold off on the news.

Last week, bond yields rose to 1.98%. Strategists have been taking down their forecasts for 2016 rate hikes on the economic weakness. Federal funds futures contracts aren’t expected to move until 2018.

Recently, American Capital Agency (AGNC) reported its results. The company was able to maintain its dividend. The best comp for American Capital Agency is Annaly (NLY). Recently, it reported better-than-expected numbers. It increased its leverage and continued to swap credit risk for interest rate risk. Non-agency REITs like Two Harbors (TWO) are more sensitive to economic strength and weakness. They bear credit risk and might be a better option during a tightening cycle.

Investors interested in making directional bets on interest rates can look at the iShares 20+ Year Treasury Bond ETF (TLT). If you’re interested in trading in the mortgage REIT sector through an ETF, you can look at the iShares Mortgage Real Estate Capped ETF (REM).

Homebuilders like PulteGroup (PHM) and CalAtlantic Group (CAA) were cheered by the strong jobs report. Job growth is the biggest catalyst for homebuilder results—even more than interest rates. You can invest in homebuilders through the SPDR S&P Homebuilders ETF (XHB).