Stock market today: Stocks erase earlier gains as bond yields climb

Stock market today: Stocks erase earlier gains as bond yields climb

Homebuilder stocks fell on Monday after a closely watched housing sentiment index broke a four-month streak of gains amid high mortgage rates.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) stayed at 51 in April, unchanged from March. To be sure, any number over 50 indicates that more builders view conditions as good than poor.

“April’s flat reading suggests potential for demand growth is there, but buyers are hesitating until they can better gauge where interest rates are headed,” NAHB chief economist Robert Dietz said in a statement.

Lennar (LEN), Pulte (PHM), and Toll Brothers (TOL) were all down more than 1% mid-morning, while the SPDR S&P Homebuilders ETF (XHB) was off 0.3%.

The flat confidence level among builders underscores how many prospective buyers and sellers, already dealing with high home prices and limited housing stock, are staying put. It comes after a higher-than-expected inflation print last week prompted investors to scale back the number of rate cuts they see this year to two, less than the median of three projected by the Fed at its March meeting.

“With the markets now adjusting to rates being somewhat higher due to recent inflation readings, we still anticipate the Federal Reserve will announce future rate cuts later this year and that mortgage rates will moderate in the second half of 2024,” Dietz said.

Mortgage rates have stayed slightly higher compared to the beginning of the year, pushing borrowers to the sidelines just as the spring homebuying season kicks into gear. The average rate on the 30-year fixed mortgage rate rose to 6.88%, higher than 6.82% the previous week, Freddie Mac reported.

In April, builders pulled back slightly on cutting home prices, with 22% of builders reporting doing so, down from 24% in March and 36% in December last year.

Meanwhile, the use of sales incentives ticked down to 57% in April from a reading of 60% in March.