Why Annaly Capital Management Stock Fell 25% This Week
Shares of Annaly Capital Management (NYSE: NLY) were among the losers this week as rising mortgage rates threatened to squeeze the mortgage REIT, and one analyst expressed caution on the stock. The company also executed a reverse stock split at the beginning of the week.
According to data from S&P Global Market Intelligence, the stock finished the week down 25.5%, trending with the broader sell-off in the market after last week's fed funds rate hike. Since the rate hike, which came with hawkish commentary from Fed Chair Jerome Powell, investors seem to believe the risk of a recession has grown, as well as the likelihood of a sustained high-interest-rate environment.
Rising mortgage rates tend to be bad for mortgage REITs like Annaly, which invests in mortgage-backed securities and other mortgage-related assets. Prices on mortgage bonds fall as yields rise, which means that Annaly's portfolio of assets loses money as interest rates and mortgage rates go up. Rising rates also cool off the real estate market, which is the main driver of Annaly's business.
Source Fool.com
