U.S. equity markets picked up where they left off in 2019 with broad advances and new record highs after snapping a six-week winning streak last week on news of the U.S. airstrike that killed a top Iranian military official in Baghdad. Tensions appeared to be at a fever-pitch on Wednesday night after Iran's counterstrike on a US base in Iraq, before easing again as U.S. and Iran indicated that de-escalation was the preferred path forward from the hostilities over the past week. Geopolitics took a back-seat by Friday morning as investors keyed-in on the BLS nonfarm payrolls report, which was a "Goldilocks" report by nearly all measures, breathing renewed life into yield-sensitive equity sectors including real estate and utilities.
(Hoya Capital, Co-Produced with Brad Thomas through iREIT on Alpha)
The major averages all climbed to new intraday all-time highs this week as the Dow Jones Industrial Average briefly topped 29,000 for the first time ever on Friday morning. The S&P 500 ETF (SPY) gained 1.0% on the week, while a strong week from the technology sector powered the tech-heavy Nasdaq ETF (QQQ) to 2.0% weekly gains. After dipping as low as 1.71% in a broad flight to safety on Wednesday morning after the Iranian airstrike, the 10-Year Treasury Yield (IEF) ended the week higher by 4 basis points to close at 1.83%. The broad-based commercial Real Estate ETF (VNQ) rallied following Friday's jobs report to close the week in the green, gaining 0.1% on the week, led by the data center, storage, and cell tower REIT sectors.
For the Hoya Capital Housing Index, homebuilders were the standout this week, surging nearly 3% on strong earnings reports from entry-level-focused homebuilders Lennar (LEN) and KB Home (KBH), which reported order growth of 23% and 38%, respectively. As discussed in our recent report on the homebuilding sector, the combination of low interest rates and strong demographic-driven demand have supported a strong reacceleration in home sales following the "mini-housing-recession" of 2018. As we've noted, we see the "multiplier" effects of accelerating new and existing home sales to be a tailwind for other housing-related sectors in 2020, exemplified this week by strong performance from homebuilding products companies Trex (TREX) and Beacon Roofing (BECN) as well as real estate data provider CoreLogic (CLGX).
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