Pre-market stocks: Why the homebuilder’s stock just tumbled

Read Time:5 Minute, 23 Second

But this isn’t the only industry to take a hit.

What’s going on: Stocks of U.S. home builders, including toll brothers (toll), Renner (Lun) and Pulte Group (PHM) was one of Friday’s biggest losers. The iShares US Home Construction exchange-traded fund fell 4.5% to end the week down 9%.
A year ago, the 30-year fixed mortgage rate was a record low of 2.65%. Stories of crazy offers and frustrated first-time buyers have become commonplace. Even Wall Street investors jumped headfirst into the craze.

“It’s been a crazy year,” Matt Holm, an agent for Compass in Austin, Texas, told my CNN business colleague Anna Barney recently.

He recalls a tiny five-year-old house that hit the market last January for $425,000, already above the listing price for similar properties. Interest is overwhelming.

“I stopped counting 35 offers,” he said. The home sold for $545,000, 30 percent above the list price.

Shares of Toll Brothers are up nearly 67% in 2021, while the S&P 500 is up 27%. Lennar rose 52% and PulteGroup rose 33%.

But the prospect of higher interest rates, a key benchmark for mortgage lending, is shaking.

The Fed said the era of minimum interest rates will soon be over, given the need to fight inflation and signs that the economy is returning to normal. Friday’s employment data reinforced those expectations.

See here: US employers added 199,000 jobs in December, missing economists’ expectations. Still, the unemployment rate fell to 3.9%. This is very close to the all-time low of 3.5% reached in February 2020. Wages also rose 0.6% as companies scrambled to attract workers, which could push prices higher.

“With unemployment below 4% and wage pressures mounting, the Fed looks set to respond quickly,” ING chief international economist James Knightley told clients.

In a report late Sunday, Goldman Sachs said it now expects the Fed to raise interest rates four times this year, starting in March. It had previously planned three additions.

Mortgage rates have already started to move higher, and U.S. bond yields have risen as investors prepare for action. The 30-year fixed mortgage rate averaged 3.22% in the week ended Jan. 6, the highest level since May 2020. That’s still low by pre-pandemic standards, but could start to ease some of the heat in the housing market.

That could be good news for would-be buyers who have been weeded out by affordability concerns — but for companies like Toll Brothers and Lennar that have been riding a tailwind, it could lead to a weaker performance this year.

Still, with the U.S. desperate for more housing supply and prices likely to remain high, analysts believe betting on homebuilders is still a smart move.

“The post-pandemic housing supercycle is far from over,” Raymond James analyst Buckhorn said in a research note published Monday.

Will Taxes on Big Oil Increase With Energy Costs?

Should the government raise taxes on companies like this shell (RDSA) and BP (BP) As energy prices soar this winter?

My CNN Business colleague Charles Riley reports that the British government is under increasing pressure to answer that question as British households grapple with skyrocketing bills.

Britons face huge increases in energy bills.BP and Shell may have to pay

The main opposition Labour Party this weekend called on Prime Minister Boris Johnson to impose a windfall profits tax on companies extracting oil and gas from the North Sea, saying the money raised could be used to cut £200 ($272) from soaring household bills.

According to the report, the party said the corporate tax rate paid by companies should be increased by 10 percentage points within a year. It would also allow the government to increase energy subsidies for the poorest households.

The big picture: British consumers will pay about $1,075 more this year to heat and light their homes, according to Bank of America figures, as wholesale energy prices have risen sharply, causing dozens of British energy suppliers to fail in recent months.

According to Bank of America data, wholesale natural gas prices in Europe were up 400 percent from the previous year, and electricity prices were up 300 percent. The increase was due to cold weather, power outages at nuclear power plants in France and reduced gas flows from Russia.

Both BP and Shell have operations in the North Sea and benefit from rising gas and oil prices. BP chief executive Bernard Looney told the Financial Times in November that the surge in commodity prices had turned the company into a “cash machine”. The company posted a third-quarter 2021 profit of $3.3 billion and said it plans to return an additional $1.25 billion to shareholders.

Rebuttal: OGUK, an industry group representing UK offshore producers including Shell and BP, said last week that the windfall profits tax would cause “irreparable damage” to the industry by making it less likely for energy companies to invest in the country Consumers are more vulnerable to global shortages.”

Why Nike and Ralph Lauren products are getting harder to find

want to buy nike (of) sports shoes, adidas (ADDDF) Undershirt, Crocs clogs, polo shirt or Canada Goose parka?

These days, you might have better luck snapping them up from their own store or their website than at a smaller chain.

Breaking it down: Major brands are reducing the number of outside retailers shipping their wares, my CNN Business colleague Nathaniel Meyersohn reports.

Instead, they focus on letting customers buy directly from their own channels as well as from a handful of wholesale partners.

Strategy: Selling directly to customers allows brands to make more money, control their prices, and present products the way they want in store displays. They can also prevent their labels from being over-discounted, which can erode their brand image and pricing power.

But the shift means shoppers will have fewer places to shop for their favorite products. It’s also putting pressure on retailers, who will no longer be able to stock the highly sought-after shoes and apparel.

Under Armour and Ralph Lauren have stopped shipping to discounters like TJ Maxx, while Nike has stopped shipping to shoe warehouse DSW.


Thierry (TLRY) Earnings are reported before the U.S. market opens.

Coming soon: All eyes will be on the latest U.S. consumer price data due on Wednesday.

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