REITs finish higher as hope of a rate cut surface again, solid results provide optimism

REITs finished slightly higher this week after 3 consecutive weeks of decline as the hope of a rate cut surfaced again, while major names posted solid results providing optimism.

“The labor market is strong — 3.7% unemployment — with the economy strong like that, we feel like we can approach the question of when to begin to reduce interest rates carefully,” Federal Reserve Chair Jerome Powell said on a “60 Minutes” episode.

If the Fed cut rates too soon, inflation would settle above the Fed’s 2% goal, Powell said. If it moves too late, that could lead to a recession.

Also, the sector saw solid quarterly results announced this week. Bigwigs such as Healthpeak Properties (PEAK), Omega Healthcare Investors (OHI), NNN REIT (NNN), The Macerich Company (MAC) and Simon Property Group (SPG) exceeded the average Wall Street estimates.

The FTSE Nareit All Equity REITs index rose by 0.15% from last week, while Dow Jones Equity All REIT Total Return Index increased by 0.16%.

The broader index tracking S&P 500 real estate stocks, Real Estate Select Sector SPDR ETF (NYSEARCA:XLRE), gained by 0.26%. Meanwhile, the FTSE NAREIT Mortgage REITs index declined by 3.02% on a weekly basis. Major mortgage REITs, Rithm Capital (RITM) and Annaly Capital Management (NLY), posted mixed quarterly results.

Meanwhile, S&P 500 increased by 1.37% from last week, concluding above the historic 5,000 points mark for the first time ever, largely on the back of technology stocks.

Industrial was the winner among subsectors with an increase of 1.77% from last week. The big names, Terreno Realty (TRNO), First Industrial Realty Trust (FR) and EastGroup Properties (EGP), posted an outright beat.

Diversified stood out as the biggest loser among subsectors, having lost 3.35% of its average value. A major reporting name of the subsector, W. P. Carey (WPC), was down ~5% over the course of the week after the net lease REIT narrowed its 2024 earnings guidance.

The week saw notable capital returns announced that positively impacted the sector’s value. Postal Realty Trust (PSTL), CBL Properties (CBL), American Assets Trust (AAT) and Weyerhaeuser (WY) declared an increase in their dividend distributions, while Simon Property Group and Rithm Capital authorized new share buyback programs.

Here is a look at the subsector performance: