REITs were already down on the week prior to the rate hike announcement on Wednesday afternoon, but the Fed's more-hawkish guidance for next year put a further hurt on the sector.
Buyers are emerging this morning, with VNQ +1.2% and IYR +1% vs. the S&P 500's 0.2% advance.
There are a number of sell-side upgrades hitting today, but also some downgrades. Dividend hikes help too, and leading gainers this morning is Urstadt Biddle Properties (UBA +8.5%) after last night's results and dividend hike. CubeSmart (CUBE +1.8%) jacked its payout by 28.6%.
Healthcare Realty Trust (HR +1.5%) and Healthcare Trust of America (HTA +1.8%) were initiated with Buy ratings at Jefferies.
Gramercy Property Trust (GPT +2.9%) announced a big portfolio acquisition.
Other movers: Realty Income (O +1.8%), National Retail (NNN +2.1%), Omega Healthcare (OHI +1.8%), Essex Property (ESS +2%), Weingarten Realty (WRI +1.7%), Life Storage (LSI +1.5%), Government Properties (GOV +3.3%), LaSalle Hotel (LHO +1.5%), Stag Industrial (STAG +1.1%), Eastgroup (EGP +1.9%)
Rising interest rates and limited upside from better economic growth thanks to long term leases have the team at BAML downgrading Realty Income (O -1.9%), National Retail Properties (NNN -1.5%), Vereit (VER -1.5%), and Spirit Realty (SRC -1.7%).
Surging interest rates this week had investors pulling money from income favorites like REITs and utilities, and rotating into yield-starved banks, insurance companies, and brokerages.
With the bond market closed for Veteran's Day, rates are taking the day off, and REITs and utilities (XLU +0.3%) are seeing a sizable bounce. VNQ +1.1%, IYR +0.9%
Retails rates are thought to be more exposed than most to rising rates, and they were among the hardest hit. Today: Realty Income (O +1.6%), Vereit (VER +4.3%), National Retail (NNN +1%), Store Capital (STOR +4.3%)
Other equity REITs: Omega (OHI +0.5%), LTC Properties (LTC +2%), Healthcare Trust (HTA +2.2%), Gramercy Property (GPT +3%), Gladstone Commercial (GOOD +4.3%), Lexington Realty (LXP +2.4%), General Growth (GGP +1%), Simon Property (SPG +1%), Retail Opportunity (ROIC +2.5%), Life Storage (LSI +1.4%), First Potomac (FPO +7.5%), Stag Industrial (STAG +1.5%)
There's plenty of green in the REIT space today, with the IYR off just 0.25% (vs. the S&P 500's 2% decline). Helping is the continuing plunge in interest rates, with the 10-year yield at 1.46% within seven basis points of an all-time low.
Among the gainers are Realty Income (O +1.7%), National Retail Properties (NNN +1%), Senior Housing (SNH +2.2%), Omega Healthcare (OHI +0.9%), AvalonBay (AVB +1.1%), Kimco (KIM +1.3%), Tanger Factory (SKT +1.9%), and Public Storage (PSA +3.8%).
Lodging REITs, however, are dependent on a steady stream of overseas tourist money, and the dollar's continued surge vs. everything not named the yen promises to crimp foreign visits. Ashford (AHT -6.6%), Sunstone (SHO -4.8%), LaSalle (LHO -4.1%), Pebblebrook (PEB -4.2%), Chesapeake (CHSP -3.3%), Host (HT -6.7%), DiamondRock (DRH -4.8%), Apple (APLE -2.9%), FelCor (FCH -5.4%).
A sharp drop in long-term rates and vanquished expectations for even one rate hike this year has income players bidding up the prices of utility stocks (XLU +0.7%) and certain REITs even as the major average fall more than 2% post-Brexit.
A check of Fed Funds futures finds traders not fully pricing in a 25 basis point rate hike until 2018!
The mortgage REIT sector (REM +0.5%) welcomes the news, with players like Annaly (NLY +1.7%), American Capital Agency (AGNC +1.1%), Two Harbors (TWO +1.7%), and Chimera (CIM +1.3%) leading the way. Western Asset Mortgage (WMC -0.8%) is a laggard after slashing its dividend by more than 30% last night.
Equity REITs are decidedly mixed. Retail names like Realty Income (O +2.4%), National Retail (NNN +2%), and Vereit (VER +0.9%) are higher, as are healthcare players like HCP (HCP +1.2%) and Medical Properties Trust (MPW +0.1). Apartment REITs are mostly lower, as are mall operators like Simon Property (SPG -0.8%) and General Growth (GGP -0.7%).
The dollar is surging post-Brexit, however, and that's taking a chunk out of the hotel REITs: Hospitality Properties (HPT -1.5%), Sunstone Hotel (SHO -2.7%), LaSalle (LHO -3.8%), Pebblebrook (PEB -2.4%), RLJ Lodging (RLJ -2.5%).