Shares in heating, ventilation, and air-conditioning (HVAC) and building systems company Johnson Controls (NYSE: JCI) were down by about 3% by 10 a.m. ET today. The move is partly due to a general market sell-off driven by the Federal Reserve's "hawkish" commentary on fighting inflation. In plain English, Federal Reserve Chair Jerome Powell signaled a willingness to raise rates further to combat inflation, and he also reiterated the target of 2% inflation.
That news is especially relevant for Johnson Controls because, earlier in the week, the stock had received a downgrade from an analyst at a heavyweight company, Bank of America 's Andrew Obin, based on potential weakness in the nonresidential construction market .
While there's clear evidence of a slowdown in residential HVAC , the nonresidential market has outperformed, and investors are willing to pay a premium for companies with extra exposure to nonresidential markets , such as Johnson Controls and AAON . That said, and as Obin notes, nonresidential markets tend to follow residential markets. The latter is sensitive to interest rate rises, making buying or remodeling a home more expensive.
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Why Shares in Johnson Controls Fell Today