How The REIT ETF Benchmarks Reacted To Fed's 0.25% Rate Hike

All in all, it was a good week for price action in the rate-sensitive real estate investment trust (REIT) sector. 

Worries that the Federal Reserve might take interest rates higher than expected evaporated when it announced a 0.25% hike rather than a 0.5% hike. The REIT exchange-traded funds (ETFs) reached four-month highs.

A strong jobs report late in the week took some of the excitement off, but the sector held in there after a quick initial drop. The next government report that might greatly affect REITs — and the rest of the stock market — comes when the January consumer price index report is released on Feb. 14.

The Real Estate Select Sector SPDR Fund XLRE has 33 holdings in the real estate investment trust sector and represents a decent cross-section of the group. REITs Prologis Inc. PLD, American Tower Corp. AMT and Equinix Inc. EQIX are the top components. The fund is up by 13% so far this year and pays a dividend of 3.7%.

The daily chart for the Real Estate Select Sector SPDR Fund looked like this:

It’s generally a positive sign that the price is now above both the 200-day moving average (the red line) and the 50-day moving average (the blue line). That the shorter-term moving average has been trending upward since December is also a positive. The relative strength indicator (RSI) below the price chart is peaking into the Overbought range.

The iShares U. S. Real Estate Exchange Traded Fund IYR is more broad-based with 83 REIT holdings. The fund is up 6% year to date and pays a 2.92% dividend.

Here’s the daily price chart of the fund:

Similar to the previous REIT ETF mentioned, this one also now trades above both of the significant moving averages. The relative strength indicator hit just above the Overbought range before coming back down a bit.

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The Feb. 14 consumer price index report showing January inflation numbers is important to this sector because the Fed may choose to increase rates more and quicker based on the results. REIT investors will be looking closely at that report.

Not investment advice. For educational purposes only.

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