This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Annaly, AGNC Lead in Session's Financials Trading

NEW YORK (TheStreet) -- Financial stocks were essentially flat mid-Wednesday on light trading ahead of the Thanksgiving holiday.

Financial Select Sector SPDR (XLF), an exchanged-traded fund that tracks financial stocks, was up just 0.12% to $21.52 on light volumes with about two hours left in the trading day.

Two of the more actively traded names in the financial sector were mortgage real estate investment trusts American Capital Agency Corp. (AGNC - Get Report) and  Annaly Capital Management (NLY - Get Report).  Both stocks bounced back from significant losses on Tuesday, when they hit the 52-week lows at or near the end of the trading session on very heavy volumes.

AGNC closed Tuesday at $19.92,  down more than 3% on the day, shortly after touching its 52-week low of $19.85. Volumes of 20.8 million were nearly triple their trailing three-month daily average. Annaly saw similar trading activity, falling 3.33% on nearly four times average daily trading volumes. Shares of Annaly closed Tuesday right at their 52-week low of $9.86.

Must Read: Banks Trade Sideways on Mixed Economic Data

Wednesday action looked to be a response to the severity of Tuesday's selloff. AGNC shares were up 2.10% on volumes that had already equalled the trailing three-month daily average with about two hours left in the trading session. Annaly shares were up 2.74% on similarly strong volumes. 

The selloff of Tuesday got the attention of at least one analyst, Credit Suisse's Douglas Harter, who wrote Wednesday that "following the pullback during earnings, we see the mortgage REIT sector as more attractive from a total return standpoint than we have seen in some time. Not only have valuations become more attractive but the REITs have moved to a more defensive positioning in order to better protect book value."

Arguing against the influence of Harter's note was the fact that his most recommended mortgage REIT, Two Harbors Investment Corp. (TWO), was up only slightly on average volume.

Mortgage REITs such as Two Harbors, AGNC and Annaly borrow short-term to buy longer-dated mortgage-backed securities. When rates go up, it harms their businesses. That's because borrowing costs go up quickly while the longer-dated mortgage-backs on their balance sheets decline in value.

Regulators have expressed concern over the vulnerability of mortgage REITs to sudden moves upward in interest rates, in part because, unlike banks, those entities aren't subject to much regulation.

In its Global Financial Stability Report last  month, the International Monetary Fund alluded to possible systemic threats from mortgage REITs, or mREITs. "Although mREITs are not large holders of MBSs on a relative basis, they have grown in importance since the global financial crisis, and their business model layers on other risks that could amplify market dislocations," the report stated.


-- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AGNC $18.37 0.00%
NLY $10.42 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs