PEAK - Stocks that thrive and struggle the most as rates rise - BofA
Interest rates are on the rise as inflation expectations continue to climb.
The 10-year Treasury yield ( US10Y ) ( TBT ) ( TLT ) topped 4% intraday on Wednesday for the first time since November. The 2-year yield ( US2Y ) ( SHY ) hit 4.9%, setting a new post-2007 high.
Market expectations for the terminal fed funds rate are close to 5.5%.
"Recent economic data (payrolls, retail sales/consumption, PCE/CPI/PPI) suggests rates are likely to be higher for longer," J.P. Morgan strategist Dubravko Lakos-Bujas wrote in a note. "The bond market has been increasingly pricing-in a more hawkish scenario, but the equity market less so."
BofA Securities screened for the stocks that do best and worst when nominal rates are rising.
"Screens are based on a regression of stocks’ monthly excess returns vs. monthly changes in the nominal 10yr yield, including only those stocks with beta (slope) that is statistically significant at the 5% level and who have at least 10 years of monthly returns," BofA strategist Savita Subramanian and team wrote in a note.
The top stocks helped by rising nominal interest rates are:
- Marathon Petroleum ( MPC ), nominal interest rate beta 15.2
- Diamondback Energy ( FANG ), 13.3
- Qorvo ( QRVO ), 13
- ON Semiconductor ( ON ), 13
- Targa Resources ( TRGP ), 12.2
- Live Nation ( LYV ), 11.9
- Las Vegas Sands ( LVS ), 11.6
- United Rentals ( URI ), 10.3
- Phillips 66 ( PSX ) 10.2
- Akamai Technologies ( AKAM ), 10.2
- Steel Dynamics ( STLD ), 9.8
- F5 ( FFIV ), 9.7
- LyondellBasell ( LYB ), 9.6
- Huntington Ingalls ( HII ), 9.3
- CBRE Group ( CBRE ), 8.6
- SBA Communications ( SBAC ), 8.4
- Freeport-McMoRan ( FCX ), 8.4
- MGM Resorts ( MGM ), 7.5
- GM ( GM ), 7.4
- NXP Semi ( NXPI ), 7.4
The stocks hurt most by rising nominal rates:
- American Water Works ( AWK ), nominal interest rate beta -9.1
- Digital Realty Trust ( DLR ), -8.3
- MarketAxess ( MKTX ), -7.7
- Take-Two Interactive ( TTWO ), -7.5
- ResMed ( RMD ), -7
- Realty Income ( O ), -6.4
- Veritas ( VTR ), -6.4
- Lennar ( LEN ), -6.2
- Chipotle ( CMG ), -6.2
- NextEra Energy ( NEE ), -5.6
- Prologis ( PLD ), -5.5
- WEC Energy ( WEC ), -4.8
- Edwards Lifesciences ( EW ), -4.7
- D.R. Horton ( DHI ), -4.7
- Mid-America Apartment Communities ( MAA ), -4.3
- Regency Centers ( REG ), -4.2
- Mondelez ( MDLZ ), -4.2
- Alexandria Real Estate ( ARE ), -4.2
- Healthpeak Properties ( PEAK ), -4
- Southern Company ( SO ), -3.9
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Stocks that thrive and struggle the most as rates rise - BofA