Kicking off a busy week of housing data and key earnings reports from retailers including Home Depot (HD) and Lowe's (LOW), US equity markets traded in a tight range with the major averages finishing the day fractionally higher. Coming off its sixth straight week of gains, the S&P 500 ETF (SPY) edged higher by less than 0.1% while the Nasdaq ETF (QQQ) finished higher by 0.1%. After hitting four-month highs earlier this month at 1.97%, the 10-Year Treasury Yield (IEF) continues to pull-back on reduced inflation expectations, ending the day lower by 3 basis points to close at 1.81%.

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  • Alex Pettee, CFA
  • US equity markets climbed for the sixth consecutive week on cooler-than-expected inflation data, hints of progress on the China/US trade dispute, and "dovish" remarks from the Fed.

  • Goldilocks is back? Coming off its worst week of 2019, commercial and residential real estate equities led the way this week as the 10-year yield retreated from four-month-highs.

  • While many analysts had expected a tariff-related uptick in inflation, the effects of Chinese currency depreciation and a general slowdown in global economic activity have kept inflationary pressures muted.

  • Retail sales rose faster-than-expected in October, driven primarily by higher gasoline prices, auto sales, and e-commerce. Brick and mortar categories, however, were weak as store closings continue to mount.

  • Ahead of a jam-packed week of housing data, the Housing Index climbed on strong earnings from D.R. Horton and gains from Restoration Hardware after Buffett's Berkshire Hathaway revealed a stake.

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  • Alex Pettee, CFA

Groundhog day? An oddly similar day to yesterday on several fronts, US equity markets finished the day fractionally higher with the S&P 500 ETF (SPY) matching yesterday's gains of 0.1% while the Nasdaq ETF (QQQ) finished fractionally lower, retreating by 0.1%. Like yesterday, inflation data this morning came in cooler-than-estimates with Core PPI retreating to the slowest rate of year-over-year growth since early 2017. And again like yesterday, the 10-Year Treasury Yield (IEF) yield ticker lower by 5 basis points, continuing to retreat from last week's intra-day high of 1.97%, ending the day at 1.82%.

Naturally, lower yields again boosted the more defensive and yield-oriented equity sectors with the materials, real estate, consumer discretionary, and utility sectors outperforming on the day. The broad-based Real Estate ETF (VNQ) finished the day higher by 0.8% following yesterday's 0.9% gains. Today's gains were led by the shopping center, cell tower, and timber REIT sectors while mall REITs were the lone sector in negative territory on the day. 

The Hoya Capital Housing Index, the benchmark that tracks the performance of the US housing industry, finished the day higher by 0.6%, led to the upside by the real estate technology and brokerage sector with strong performance from Realogy (RLGY) and Zillow (Z). After lagging for much of the year, the real estate technology and brokerage sector has sprung back to life over the last quarter with the sector jumping 17% versus the index's gains of 10% following strong earnings reports. Homebuilders also delivered a solid day with NVR (NVR), Meritage (MTH), and Taylor Morrison (TMHC) all climbing at least 1% on the day. 

This morning, the Bureau of Labor Statistics released Producer Price Index data for October. In a repeat of yesterday's CPI data, the "headline" PPI print came in slightly hotter-than-expected but the more economically-relevant Core PPI data was cooler-than-estimates. Year-over-year, Core PPI is higher by just 1.63%, the coolest rate of producer price increases since early 2017. Yesterday, the BLS reported that Core CPI rose 2.31% on a year-over-year basis, retreating from last month's 2.36%, and showing signs of cooling yet again following a brief inflation scare in 2018 after the passage of tax reform and the concurrent synchronous global growth.