With interest rates on the rise, attention has increasingly focused on the housing market, which has been in the grips of a slowdown since its postpandemic surge.
Fresh signs of trouble come from Compass
whose shares are tumbling in premarket after the real-estate brokerage and tech provider slashed its annual revenue guidance and revealed cost-cutting plans, citing a slowing market.
Here’s a chart showing the rough ride for shareholders since Compass’s spring 2021 debut from blogger Wolf Street, who warns the end is nigh for the company based on how fast it has been burning cash:
What’s a wary real-estate investors to do? Our call of the day from Nuveen’s chief investment officer Saira Malik anticipates “neither a bubble nor bottom” for the market, but says defense is the smartest play right now when to comes to this market.
“Deteriorating home builder and consumer sentiment, higher mortgage rates, historically low affordability, declines in housing starts and building permits, and record-low inventories of existing homes for sale, among other factors,” will have implications for the housing sector and broader economy, Malik wrote in a commentary Monday.
“But in our view they’re not evidence of a housing bubble that’s due to burst” with demand still healthy, she said.
Still, plenty of pain remains for renters as prices continue to soar, and with higher home prices and rental costs, Americans will curb spending on goods and services, eventually hitting corporate earnings and keeping markets volatile, said Malik.
Real-estate investors need to stay “well-positioned, especially if their sector and regional exposures are aligned with prevailing demographic and supply/ demand trends. Builders are still playing catch-up from the global financial crisis, with housing starts still above trend. This reinforces longer-term price stability in the sector and supports our constructive outlook,” she added.
Also, she advises staying defensive through dividend growth stocks that are often higher quality and derive more of total return from dividends instead of price appreciation.
On the housing data front, we’ll get housing starts and sales of existing homes ahead of the open, following Monday’s data showing another drop in confidence. An update on existing-home sales is due later in the week.
Following a profit warning last month, retailing giant Walmart
has beat earnings expectations, and shares are up. Home Depot
also beat on profit with record sales, but the stock is down. TJX
is still to come.
Signs of more Big Tech fallout from a slowing global economy, with Apple
reportedly laying off about 100 contract workers. Also, Apple wants workers to return to the office three days a week.
Warren Buffett’s Berkshire Hathaway
boosted stakes in Amazon
while selling GM
over the past quarter, according to filings that rolled in Monday from hedge and investment funds. Elsewhere, Paulson & Co., the hedge fund run by John Paulson, exited Exxon Mobil
and SPDR Gold ETF
George Soros’s investment fund bought Tesla
stakes, adding to Lucid
and Ray Dalio’s Bridgewater picked up Rivian
On the data front, building permits and housing starts will be released at 8:30 a.m. Eastern, followed by industrial production and capacity utilization.
President Joe Biden will sign the Democrats’ landmark climate change and healthcare bill on Tuesday.
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Bank of America has released its monthly global fund manager survey. Among the findings, the net percentage of investors who expect growth will beat value in the next 12 months has turned positive for the first time since August 2020:
These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern Time:
| BBBY, ||Bed Bath & Beyond|
| TSLA, ||Tesla|
| AMC, ||AMC Entertainment|
| GME, ||GameStop|
| MEGL, ||Magic Empire Global|
| AAPL, ||Apple|
| NIO, ||NIO|
| AMZN, ||Amazon|
| MULN, ||Mullen Automotive|
| BBY, ||Best Buy|
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