NEW YORK (TheStreet) -- Annaly Capital Management (NLY) closed down 3.5% to $11.71 in Tuesday trading, moving in sympathy with competitor American Capital Agency Group (AGNC). The mortgage real estate investment fund (REIT) saw 26.2 million shares change hands, well over its three-month average daily trading volume of 13.9 million.
American Capital reported a third-quarter loss of $1.80 a share, compared to analysts' expectations of 77 cents a share, according to Thomson Reuters' figures. The company blamed volatility in interest rates and mortgage spreads for the earnings loss, two factors which significantly influence Annaly Capital operations. Annaly expects to report third-quarter earnings on Nov. 4.
Also influencing shares, The Financial Times recently reported the New York Federal Reserve instigated a "deep dive" into the relationship between banks and mortgage REITs. The Fed is concerned if interest rates should succumb to volatility, mortgage REITs might diminish their stake in mortgage-backed securities (MBS), sparking a market selloff on a larger scale. The FT noted the firms have increased MBS holdings by 188% since 2009 to a combined $460 billion stake.
TheStreet Ratings team rates Annaly Capital Management as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate Annaly Capital Management (NLY) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself."