Stocks are lower this morning although the sell-off in tech appears to be taking a breather. Bonds and MBS are down small.
The problem children in the global market are behaving this morning. The French OAT has a yield of 5.05%, just off its highs, while the Korean stock market managed to eke out a small gain in a late day rally. Oil is higher as the Iranians say they are ready to attack civilians and economic targets.
The index of leading economic indicators was flat in September after declining slightly in August. “The US LEI was flat in September. However, due to an upward revision to July’s data, the Index is at a higher level than last month’s report for August,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “Five out of ten components made positive contributions to the LEI in September, led by the interest rate spread and average weekly hours in manufacturing. Nevertheless, these gains were offset by a large decline in consumer expectations and much smaller negative contributions from stock prices, new orders for capital goods and building permits. The LEI’s six-month growth rate increased slightly, which suggests the economy is still growing and will continue to grow, but is becoming less dependent on consumer spending and more dependent on business investment. The Conference Board now expects real GDP to grow by a 2.2% annualized rate in 2026, with our outlook for 2027 at 2.0%, higher than previously forecasted.”
The biggest negative contributor was consumer sentiment (which is often a proxy for gasoline prices) while the biggest positive contributor was the sell-off in the bond market. A sell-off in the bond market means a steeper yield curve, which is often a signal that the economy is getting stronger.
Mortgage REIT Rithm Capital reported earnings per share of $0.39, an increase from $0.04 per share last quarter on a GAAP basis. On a non-GAAP basis EPS fell from $0.60 to $0.55. RTL (residential transitional loans i.e. fix and flip, ground up construction) continues to grow through its Genesis platform. Rithm did its first securitization of RTL loans this quarter.
New Rez saw volume decrease 21% YOY to $12.9 billion. Gain on sale margins were relatively steady at 139 bais points. Rithm bought $1.5 billion on NQM loans for its portfolio and did a couple securitization. The company continues to purchase MSRs.
“Rithm’s strong third quarter results reflect disciplined execution across every part of our platform,” said Michael Nierenberg, CEO of Rithm Capital. “We continued to scale our asset management business, closing new funds and growing a more durable, fee-based earnings stream, while our operating companies delivered: Newrez generated a 24% annualized operating return on equity(3), Genesis reached year-to-date originations of $5.0 billion, and Elecor expanded its third-party capital base by executing a joint venture for a core NYC property, while signing 320,000 square feet of new leases. Our businesses continue to perform, and the strength and breadth of our platform position us well as we enter the fourth quarter with significant momentum and opportunity ahead for our shareholders, clients, and partners.”
