Stock Market Today, Oct. 20: AGNC Investment Rises on Stronger Sector Tone Despite Book-Value Decline
AGNC Investment (NASDAQ:AGNC), an agency mortgage REIT, closed at $8.80, up 4.3%. AGNC rose despite releasing quarterly results showing a book value decline. Meanwhile, investors monitored Tuesday’s earnings call for details. They’re also awaiting news on interest rates at the upcoming Fed meeting that concludes on Oct. 28.
Trading volume reached 36.7M shares, coming in about 29% above its three-month average of 28.5M shares. AGNC Investment priced its IPO in 2008 and has fallen 54% since going public.
How the markets moved today
S&P 500 (SNPINDEX: ^GSPC) closed at 7,713, up 0.3%, while the Nasdaq Composite (NASDAQINDEX: ^IXIC) finished at 26,425, down 0.02%. Among mortgage REIT focused on agency residential mortgage-backed securities peers, Annaly Capital Management (NYSE:NLY) closed at $18.29, up 3.2%, and Rithm Capital (NYSE:RITM) closed at $8.64, up 2.4%, signaling firmer sector tone.
What this means for investors
AGNC’s results are very sensitive to short- and long-term interest rates. That’s because the company earns a spread between the two as it borrows to purchase long-term mortgage-backed securities.
Management noted that rising Treasury yields and wider agency mortgage-backed securities spreads pressured book value, helping explain today’s active stock trading. Looking at the recently reported third-quarter results, AGNC reported a 16.9% drop in tangible book value.
Still, the company said new investments point to an 18% to 20% return on equity. Investors will undoubtedly monitor the interest rate spread to see if that’s sustainable.
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