Real estate stocks rally after market correction

Comeback comes a day after Biden victories and interest-rate cut

Mar.March 04, 2020 05:30 PM
REIT stocks, along with the rest of the market, rebounded a day after Super Tuesday (Credit: iStock)

REIT stocks, along with the rest of the market, rebounded a day after Super Tuesday (Credit: iStock)

Real estate stocks bounced back Wednesday after a rocky stretch triggered by the coronavirus outbreak.

The stock market as a whole rebounded Wednesday as the S&P 500 closed 4.2 percent higher a day after Democratic presidential candidate Joe Biden won 10 of the 14 primaries on Super Tuesday. The Dow Jones Industrial Average was up more than 1,170 points.

Public real estate investment trusts also ended on a higher note. Nareit’s All REIT Index closed 3.74 percent higher. According to Nareit, an industry group focused on REITs, all sectors were up.

“Today most of the names are participating in a rally in the REIT space, reversing a trend over the last couple of weeks,” said James Shanahan, a senior equity research analyst at financial services firm Edward Jones.

The market bump came after news of growing coronavirus outbreaks in several countries caused equities to plunge last week. REITs, typically viewed as defensive investments, also fell.

The only names that generally outperformed during the sell-off were data-center and cell-tower companies, Shanahan said. Retail and hotel firms were “significantly underperforming,” but other sectors, such as health care and residential REITs, also were not performing well, he added.

“In prior market corrections, we would’ve observed some buying in the REIT names, especially if the market sell-off happened concurrently with a decline in yield in the market,” Shanahan said.

The sell-off continued earlier this week, with investors appearing to react negatively to the Federal Reserve’s emergency interest rate cut — a move that at first briefly lifted markets.

The rate cut came in response to the novel coronavirus and the risks the respiratory illness it causes, COVID-19, poses to the economy. First reported in China in December, it has killed more than 3,200 people globally, stymied travel and led to shortages of supplies such as face masks and hand sanitizer.

“It just appears to us as though there was a lot of fear, and it led to somewhat indiscriminate selling of REITs and financial-services stocks in recent weeks,” Shanahan said.

Write to Mary Diduch at [email protected]

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