A day after rallying on the Federal Reserve's latest policy announcements, the stock market took a rapid 180, with technology stocks (-2.8%) in particular falling off a cliff.
Giving the sector a bit of a shove Thursday was Europe, where both England and Norway's central banks raised their benchmark interest rates – by 15 basis points to 0.25%, and by 25 basis points to 0.5%, respectively. (A basis point is one one-hundredth of a percentage point.)
That provided a spark for at least some of the selling in technology, which also has been trading at extremely lofty levels of late. At nearly 27 times forward earnings estimates, tech is the second most expensive sector and far frothier than the S&P 500's 20.5 ratio.
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Mega-cap names Apple (AAPL, -3.9%) and Microsoft (MSFT, -2.9%) accounted for significant chunks of losses in the major indexes. Chip stocks were brutalized, too.
"Reports that Apple is potentially taking wireless chip production in-house is adding to the weakness in multiple [semiconductor] components," says Michael Reinking, senior market strategist for the New York Stock Exchange. Skyworks Solutions (SWKS, -8.5%) and Xilinx (XLNX, -8.2%) were among the weakest performers in the semiconductor industry.
That led to deep pain for the Nasdaq Composite, which retreated 2.5% to 15,180. The S&P 500 lost 0.9% to 4,668, and strength in cyclical sectors limited the Dow Jones Industrial Average to a marginal decline to 35,897.
Other news in the stock market today:
- The small-cap Russell 2000 sank 2.0% to 2,152.
- U.S. crude oil futures managed a 2.1% gain against the grain, settling at $72.38 per barrel.
- Gold futures gained 1.3% to $1,788.10 after the U.S. dollar shrank back.
- Some of the air came out of Bitcoin, too, with the cryptocurrency declining 2.7% to $47,913.61. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
Look to Real Estate for Stability in 2022
The traditional wisdom goes that rate hikes can adversely affect dividend-yielding stocks. After all, the thinking goes: If you can get comparable income from bonds, which are typically less risky than equities, why wouldn't you opt for the relative safety of debt?
Real estate investment trusts (REITs), however, typically act as the exception, not the rule, with S&P Global noting that during the majority of periods of significantly rising rates, REITs have either matched or beaten the S&P 500.
And there are other reasons to believe that 2022 could be a good year for REITs.
"As commercial activity and day-to-day life normalize, demand for commercial and residential real estate space will continue to recover," says State Street Global Advisors. "Combined with higher rent inflation in 2022, this supports REIT dividend growth and potential valuation appreciation."
In our latest look-ahead for investors positioning themselves for 2022, we explore the real estate sector. Read on as we analyze 12 of the best REITs for 2022 – picks that offer a mixture of below-average valuations, above-average yields and some growth potential.
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