Jim Cramer’s daily rapid fire looks at stocks in the news outside the CNBC Investing Club portfolio. Lowe’s : The home improvement retailer beat on earnings but missed on revenues. Lowe’s also cut its full-year outlook. Shares were higher earlier but turned modestly negative. “The stock is hanging because of the Federal Reserve. No one wants to this stock ahead of Jackson Hole,” Jim Cramer said Tuesday. Lowe’s says it needs housing to be better. “The Fed lowers [rates], we get transactions.” Medtronic : The medical devices giant raised its full-year outlook after beating quarterly estimates. The stock rose 3%. “I know that Medtronic has been one of my faves,” Cramer said. “I’m not sure about this one.” Amer Sports : The company behind the Salomon and Wilson brands delivered better than expected quarter. The stock jumped more than 12%. “This one has been one that’s been a disappointment. Maybe it’s finally showing some life,” Cramer said. Vornado Realty : The real estate investment trust got a double upgrade to buy from sell at Evercore ISI. Shares rose modestly to a 52-week high. Many people think “it’s a bridge too far to think that city real estate can come back,” Cramer said. He stressed that’s not the case. “It’s good.” Abercrombie & Fitch : The retailer was named a positive catalyst idea at Citi. The stock was little changed. “The company has been money over and over and over again.”
Cedric Bobo discusses a new program for Black student-athletes to transition into the commercial real estate market.
Diana Olick | CNBC
When Darius Livingston graduated from the University of California, Davis, two years ago, he knew his football career was over. Like most of his former teammates — and the majority of college athletes — he wasn’t going pro.
Instead, Livingston went into commercial real estate, thanks to lessons he learned from a paid internship program that teaches young students of color the fundamentals of finance, with a particular focus on real estate investing.
The program, Project Destined, is a social impact platform founded by former Carlyle Group principal Cedric Bobo.
Bobo made a name for himself in real estate investing and then decided to pay it forward. He launched the finance program in 2016 primarily for high school students. Then he broadened it to colleges, seeing the opportunity for both internships and jobs before and after graduation.
Eager to diversify their workforces, some of the largest real estate development, finance and management firms have signed on to fund the internships and mentor the students. That includes names like Boston Properties, Greystar, Brookfield, CBRE, Equity Residential, Fifth Wall, JLL, Skanska, Vornado and Walker & Dunlop.
The program has trained more than 5,000 participants from over 350 universities worldwide and has partnered with over 250 real estate firms.
And now, it’s gearing some of its efforts specifically toward Black student-athletes.
After doing a pilot program recently with student-athletes from UC Davis, Bobo has announced a partnership with the Black Student-Athlete Summit, a professional and academic support organization, to offer paid, virtual internships to 100 student-athletes from nine Division I schools. It includes 25 hours of training.
“Program participants will also join executives to evaluate real-time commercial real estate transactions in their community and compete in pitch competitions to senior industry leaders,” according to a release announcing the partnership. “The internship includes opportunities for scholarships and networking.”
Livingston went through the UC Davis pilot in his last semester of college, then got internships with Eastdil and Eden Housing. He is now an acquisitions and development associate at Catalyst Housing Group, a California-based real estate development firm and a financial backer of the new partnership.
“I think, for me, it was really a realization that I probably won’t be a first-round draft pick, and that’s OK,” explained Livingston. “It’s really being exposed to other opportunities. That’s why I’m so blessed to have Project Destined come along and expose me to the commercial real estate industry and the mindset that I deserve to be an owner in the communities that I live in.”
That right of ownership has long been Bobo’s mantra and was the crux of his pitch as he announced the new arm of his program to hundreds of students at the Black Student-Athletes Summit at USC. He wants them to understand that they can create change in their own neighborhoods by owning and managing real estate. More important, he wants them to know that ownership is possible.
“Our program is not just about how we see you all,” Bobo said of the real estate executives who were on hand for the announcement. “It’s how you see yourselves.”
While the graduation rate for Black student-athletes is improving slowly, a lot of students who were showered with resources in school find themselves struggling once they finish their athletic endeavors and get out in the workforce.
“A lot of these kids may think they’re a first-round draft pick, and that is a percent of a percent of a percent of a percent, so it’s really being real with yourself and knowing that you deserve much more than what you’re simply exposed to, and that’s just sports,” Livingston said.
Financial support for the program comes from real estate firms including BGO, Brookfield, Catalyst Housing Group, Dune Real Estate Partners, Jemcor Development Partners, Landspire Group, Marcus & Millichap, Virtu Investments and The Vistria Group, among others.
“The expansion of this platform is a natural evolution of this collective effort and will provide tangible pathways for thousands of Black student-athletes to pursue future careers in commercial real estate,” said Jordan Moss, who is also a former student-athlete at UC Davis and the founder and CEO of Catalyst.
Project Destined also has been working with the NBA and the WNBA to give professional athletes more options after they’re finished with their athletic careers.
Livingston said he thinks athletes make the best employees.
“We play to win,” he explained. “It’s the competitive nature. We want to outwork our opportunities.”
A major activist investor is betting stalled return-to-office plans will stir up more trouble in commercial real estate.
Land and Buildings’ Jonathan Litt has been shorting REITs with high office space exposure for three years, and he has no plans to shift gears.
“If you have no rent growth and your vacancies are going up and you have giant operating expenses to run an office building, you’re going backwards fast,” the firm’s chief investment officer told CNBC’s “Fast Money” on Tuesday.
Litt first warned Wall Street an “existential hurricane” was about to hit the sector in May 2020. Now, he’s saying the “hurricane has landed.”
He’s doubling down on the call — citing spiking interest rates and high inflation. Litt calls them two factors he didn’t anticipate when he first started shorting these companies in May 2020.
DC-based JBG Smith Properties is one of Litt’s major shorts. It’s down 58% since the World Health Organization declared Covid-19 as a pandemic on March 11, 2020. So far this year, JBG Smith is off 20%.
“Washington, DC is one of the toughest markets in the country today,” noted Litt. “They have a substantial office portfolio.”
He adds the crackdown on lending is compounding the problems.
“This isn’t a work from home story anymore. This is a financing story. It’s kind of like them mall business went from the mall problem to the financing problem,” Litt said. “Now, it’s a financing problem. And as these debts come due, there’s really nowhere to go because lenders aren’t lending to the space.”
JBG Smith did not immediately respond to a request for comment.
There was a time when talk of the “retail apocalypse” was so prevalent that one might have assumed every shopping mall in the country was about to be boarded up and our only choice for buying items would be putting in an order at Amazon. Clearly, that discussion was hyperbole. Many malls did shutter, but others are thriving to this day. Amazon is ubiquitous, but other retailers are growing, too. Still, it is also true that a lot of disruption occurred in between the events that prompted the “apocalypse” chatter and the firmer ground where retail real estate stands today. Recalling how these events played out is helpful in understanding the situation facing U.S. office properties. The shift to e-commerce was the seismic force that threw off the balance in the retail sector. And it didn’t help that companies had built more stores than were really needed. For office buildings, the pandemic knocked things out of whack. The United States may let its Covid-19 national emergency order expire on Thursday, but worker expectations won’t easily go back to where they were in March 2020. This is particularly true in the cities where the virus struck hard like San Francisco, Seattle and New York. Employees there have embraced hybrid and remote working arrangements. The shopping malls that fared the best as e-commerce changed consumer behavior shared many characteristics. Labelled class A malls, these properties could fetch around $1,000 per square foot from their upscale retail tenants in 2020. By comparison, so-called class C malls were being paid about $320 per square foot. Many class A malls were newer and were built in areas with growing populations. Some had popular designs, such as an open-air shopping center, or a mix entertainment and dining options alongside retail stores. Industry experts are seeing the same kind of divide in the office space. Tenants want newer buildings, with spaces where employees can gather casually. They also are drawn to “green” buildings that have more sustainable features, and can help companies reach net-zero carbon emissions goals. As the value of the “unloved” malls plummeted, some real estate developers looked to retrofit these properties to attract new tenants. Some went further, repurposing the property for other uses such as a health clinic or warehouse . The same idea is being discussed for office buildings, but one-size will not fit all. Developers know it will be costly to repurpose an office building and changing zoning can stall a project. Peter Merrigan, CEO and managing director of global real estate private equity firm Taurus Investment Holdings, said he has seen many of these cycles in different segments of the CRE industry. In some cases, the situation needs to get much worse before it gets better. In the case of shopping malls, there were times when a strip mall could be revamped by removing smaller tenants then redesigning the space to fit the needs of a larger retailer. But, Merrigan explained, there needs to be demand for the space so that several different retailers will be bidding on it. If there isn’t that kind of demand, the property will languish and go to land value. “The old format just didn’t work anymore, so then you have to rezone it,” he said. Merrigan said there may be parallels to what’s going on in office, or maybe the labor market conditions will change and companies will gain enough leverage to bring employees back to the office. “I think if we go through a major labor market correction and this dynamic remains after that, then I’ll buy into the fact that this work-from-home dynamic is permanent,” he said. For those who are worried about the ripple effects that could happen if too many landlords walk away from office buildings, another lesson can be drawn from the shake out among malls: it has taken many years to play out. In fact, it still is. In April, the two biggest CRE loan losses involved shopping mall properties in Arkansas and Guam , according to real estate data tracker Trepp. Finding the risks Still, the market remains on alert. Finding the risks can be tough because CRE is a huge category and the threats will vary widely by property type and location. “While segments of U.S. office face clear challenges, conditions are very different over in London, where a supply crunch looms for West End office,” Osmaan Malik, an analyst at UBS recently wrote in a research note. “Within markets, a flight to quality is under way.” Malik cited CBRE data that shows for U.S. office, 80% of occupancy loss between 2020 and 2022, was driven by just 10% of the buildings. There certainly will be more defaults ahead as landlords “hand back the keys” on some properties, Malik said. And this scenario will play out even if the landlords have reliable access to capital and continue to make new investments elsewhere. Credit is tighter A lack of access to capital can make the situation worse. Signs are evident that a tightening is occurring. “The signal from the [commercial mortgage-backed securities] market, which, in our view, is the most real-time barometer of investor sentiment, clearly points to a slowdown in commercial real estate lending, with stricter terms, punitive financing costs, and reduced appetite for office properties,” Goldman Sachs analyst Lotfi Karoui wrote in a research note on Monday. Karoui said bank data doesn’t show a notable shift yet, but he expects financing conditions are “challenging” nonetheless, and will extend the downturn in CRE transaction volume that’s been seen so far this year. Goldman research shows CRE transaction volumes were at $62 billion at the end of the first quarter, down 65% from the same period a year ago. The analyst has also noticed that among the deals that are getting done, lenders are taking on less leverage. The average loan-to-value ratio is 51% since Silicon Valley Bank’s failure in early March, compared with a post-Covid average of 60%, he said. And what types of deals are getting done? There may be no surprise that there has been a huge drop-off in the number of loans with office properties as collateral since March. According to Goldman and Trepp research, about 19% of the loans newly issued were secured by office buildings, compared with a three-year average of 32%. VNO’O YTD mountain Vornado shares have fallen more than 38% since the start of the year. Instead, there has been an increase in retail and industrial property loans, which have seen “firmer fundamentals” in recent months, Karoui said. All this is to say, that after some adjustment, there will be opportunity. In late April, Vornado Trust , one of New York’s largest owners of office and retail assets, suspended its dividend. UBS analyst Solita Marcelli warned that it wouldn’t be the only office REIT to take this step. However, Marcelli said that investors with a two-year time horizon could take advantage of “attractive opportunities that are emerging” in industrial, residential rentals, self-storage, data centers, wireless towers and grocery-anchored shopping centers. —CNBC’s Michael Bloom contributed to this report.
U.S. stock indexes finished sharply higher on Thursday, the second-to-last trading session of the year, with the Nasdaq Composite jumping 2.6%, erasing losses from earlier in the week.
The three main indexes built on premarket gains after U.S. weekly jobless claims data showed the number of workers receiving benefits has climbed to the highest level since February, a tentative sign that the Federal Reserve’s interest-rate hikes might be slowing economic growth and inflation.
How stocks traded
The S&P 500 SPX, +1.75%
rose 66.06 points, or 1.8%, to end at 3,849.28.
Dow Jones Industrial Average DJIA, +1.05%
added 345.09 points, or 1.1%, finishing at 33,220.80.
Nasdaq Composite COMP, +2.59%
climbed 264.80 points, or 2.6%, to finish at 10,478.09.
On Wednesday, the Nasdaq Composite dropped 1.4% to 10,213, its lowest closing level of the year. The S&P 500 is up more than 6% from its 2022 low from mid-October, but the large-cap index remains down 19.2% year-to-date, FactSet data show.
What drove markets
The penultimate session of 2022 showed tentative signs of delivering some much needed festive cheer for the stock market as a hope for “Santa Claus rally” had earlier failed to materialize.
The jobless-claims data “points to a loosening in the labor market, which is welcome news for the Fed,” said Larry Adam, chief investment officer at Raymond James, in a tweet.
However, analysts at Citi still think the claims data indicates a still-very-tight labor markets compared to historical levels.
“While both initial and continuing claims increased this week, they remain within the levels of late 2019,” wrote Gisela Hoxha, U.S. economics research analyst at Citi. “Anecdotes of company layoffs have increased in recent months, particularly in the tech sector. While it could be hard to disentangle the seasonal effects from the announced layoffs, in our view there is no significant evidence of them showing up in the claims data yet.”
Some of those layoffs could be taking effect a couple months later as employees might be kept on payroll for some time after the announcement, which will become significant signs of weakness in the labor market in 2023, Hoxha added.
Stocks were on track to finish what’s set to be the worst year since 2008 not far from 2022 lows. The S&P 500’s 52-week closing low at 3,577.03 was hit on Oct. 12.
Still, the three indexes managed to erase losses from earlier in the week on Thursday. Nasdaq Composite was down 0.2% this week, while the S&P 500 gained 0.1% and the Dow was nearly flat as of Thursday’s close. If the S&P 500 can hold on to weekly gains through Friday, it would mark the end of a three-week losing streak that has been the index’s longest since September, FactSet data show.
Companies in focus
Tesla Inc. TSLA, +8.08%
shares finished 8.1% higher on Thursday after posting its first rise in eight sessions Wednesday. The electric-vehicle maker’s shares had declined in seven consecutive sessions, their worst losing streak since a seven-session run that ended on Sept. 15, 2018.
Southwest Airlines LUV, +3.70%
remains in focus as the airline tries to recover from logistical issues that caused thousands of flight cancellations over the past week. The stock fell 11% over the past two days, but rose 3.7% in Thursday session.
General Electric’s GE, +2.17%
spinoff of GE HealthCare Technologies will join the S&P 500 index when it begins trading as a separate public company on Jan. 4. GE HealthCare will replace Vornado Realty Trust VNO, +1.63%,
which will move to the S&P MidCap 400. Vornado will replace logistics company RXO RXO, +8.39%,
which will move to the S&P SmallCap 600. GE HealthCare — trading on a when-issued basis — rose 0.9%, while Vornado gained 1.6% and RXO jumped 8.4%.
Cal-Maine CALM, -14.50%
shares ended 14.5% lower after its quarterly earnings came in below Wall Street forecasts. Cal-Maine reported record sales for the quarter as an avian flu outbreak continued to limit the supply of eggs, driving prices sharply higher. The company also said there were no positive tests for avian flu at any of its production facilities, as of Wednesday.
U.S. stock indexes finished sharply higher on Thursday, the second-to-last trading session of the year, with the Nasdaq Composite jumping 2.6%, erasing losses from earlier in the week.
The three main indexes built on premarket gains after U.S. weekly jobless claims data showed the number of workers receiving benefits has climbed to the highest level since February, a tentative sign that the Federal Reserve’s interest-rate hikes might be slowing economic growth and inflation.
How stocks traded
The S&P 500 SPX, +1.75%
rose 66.06 points, or 1.8%, to end at 3,849.28.
Dow Jones Industrial Average DJIA, +1.05%
added 345.09 points, or 1.1%, finishing at 33,220.80.
Nasdaq Composite COMP, +2.59%
climbed 264.80 points, or 2.6%, to finish at 10,478.09.
On Wednesday, the Nasdaq Composite dropped 1.4% to 10,213, its lowest closing level of the year. The S&P 500 is up more than 6% from its 2022 low from mid-October, but the large-cap index remains down 19.2% year-to-date, FactSet data show.
What drove markets
The penultimate session of 2022 showed tentative signs of delivering some much needed festive cheer for the stock market as a hope for “Santa Claus rally” had earlier failed to materialize.
The jobless-claims data “points to a loosening in the labor market, which is welcome news for the Fed,” said Larry Adam, chief investment officer at Raymond James, in a tweet.
However, analysts at Citi still think the claims data indicates a still-very-tight labor markets compared to historical levels.
“While both initial and continuing claims increased this week, they remain within the levels of late 2019,” wrote Gisela Hoxha, U.S. economics research analyst at Citi. “Anecdotes of company layoffs have increased in recent months, particularly in the tech sector. While it could be hard to disentangle the seasonal effects from the announced layoffs, in our view there is no significant evidence of them showing up in the claims data yet.”
Some of those layoffs could be taking effect a couple months later as employees might be kept on payroll for some time after the announcement, which will become significant signs of weakness in the labor market in 2023, Hoxha added.
Stocks were on track to finish what’s set to be the worst year since 2008 not far from 2022 lows. The S&P 500’s 52-week closing low at 3,577.03 was hit on Oct. 12.
Still, the three indexes managed to erase losses from earlier in the week on Thursday. Nasdaq Composite was down 0.2% this week, while the S&P 500 gained 0.1% and the Dow was nearly flat as of Thursday’s close. If the S&P 500 can hold on to weekly gains through Friday, it would mark the end of a three-week losing streak that has been the index’s longest since September, FactSet data show.
Companies in focus
Tesla Inc. TSLA, +8.08%
shares finished 8.1% higher on Thursday after posting its first rise in eight sessions Wednesday. The electric-vehicle maker’s shares had declined in seven consecutive sessions, their worst losing streak since a seven-session run that ended on Sept. 15, 2018.
Southwest Airlines LUV, +3.70%
remains in focus as the airline tries to recover from logistical issues that caused thousands of flight cancellations over the past week. The stock fell 11% over the past two days, but rose 3.7% in Thursday session.
General Electric’s GE, +2.17%
spinoff of GE HealthCare Technologies will join the S&P 500 index when it begins trading as a separate public company on Jan. 4. GE HealthCare will replace Vornado Realty Trust VNO, +1.63%,
which will move to the S&P MidCap 400. Vornado will replace logistics company RXO RXO, +8.39%,
which will move to the S&P SmallCap 600. GE HealthCare — trading on a when-issued basis — rose 0.9%, while Vornado gained 1.6% and RXO jumped 8.4%.
Cal-Maine CALM, -14.50%
shares ended 14.5% lower after its quarterly earnings came in below Wall Street forecasts. Cal-Maine reported record sales for the quarter as an avian flu outbreak continued to limit the supply of eggs, driving prices sharply higher. The company also said there were no positive tests for avian flu at any of its production facilities, as of Wednesday.
