Housing Stocks Fall as Rate-Cut Outlook Softens

Major U.S. equities indexes were mixed to start the new trading week as earnings season intensifies.

Meanwhile, Minneapolis Federal Reserve President Neel Kashkari told a town hall that he expects interest-rate cuts to proceed moderately over the next few quarters. However, he indicated that unexpected weakness in the labor market could prompt more rapid rate reductions. The prospect of rates remaining elevated for longer contributed to an uptick in the 10-year Treasury yield.

The S&P 500 fell 0.2% on Monday. The Dow tumbled 0.8%, ending a three-day winning streak for the blue-chip index. After trading in negative territory for most of the session, the Nasdaq recovered in the afternoon to close with a daily gain of 0.3%.

Concerns about the pace of interest-rate reductions weighed on stocks in the housing sector, with the likelihood of mortgage rates staying high dampening the outlook for real estate. Shares of construction materials supplier Builders FirstSource (BLDR) tumbled 5.2%, making the steepest loss of any S&P 500 constituent. Shares of homebuilders Lennar (LEN) and D.R. Horton (DHI) were down 4.4% and 4.2%, respectively, while numerous real estate investment trusts (REITs) also lost ground.

Cigna (CI) shares fell 4.7% following reports about a resumption of merger negotiations with rival health insurer Humana (HUM). The two companies engaged in talks last year but failed to strike a deal, but according to Bloomberg, they are in the early stages of a new round of negotiations. Cigna announced in January that it plans to sell its Medicare Advantage business to Health Care Service Corporation, suggesting that the divestment could make a potential merger with Humana more palatable to regulators. Humana shares slipped 2.5% on Monday.

Shares of Monolithic Power Systems (MPWR), a semiconductor maker specializing in power management solutions, lost 3.6%. Recent reports indicated that Monolithic Power insiders unloaded more than $300 million worth in shares of the company. Investors often interpret insider sales as a sign of limited confidence in a firm’s future performance.

Monday’s top performance in the S&P 500 belonged to shares of Kenvue (KVUE), the consumer health company that completed its separation from Johnson & Johnson (JNJ) in August, which surged 5.5%. The gains followed multiple reports that activist investor Starboard Value had accumulated a significant position in Kenvue, home to well-known brands like Benadryl and Band-Aid. According to The Wall Street Journal, the hedge fund aims to push for changes to help boost Kenvue’s stock price.

Shares of artificial intelligence (AI) semiconductor behemoth Nvidia (NVDA) added 4.1% in the wake of positive commentary from several Wall Street analysts. Bank of America and investment research firm CFRA boosted their price targets on Nvidia stock last week. Analysts at Bank of America highlighted Nvidia’s partnerships with companies like Microsoft (MSFT) and Accenture (ACN), solidifying Nvidia’s position as a go-to collaborator in the enterprise AI space.  

Boeing (BA) shares jumped 3.1% after the company reached a tentative deal with the union representing its machinists, potentially ending a strike that has persisted for five weeks and constrained the aircraft maker’s operations. According to a statement released over the weekend, the union plans to vote Wednesday on the new deal, which includes a 35% increase in wages over four years—a step up from Boeing’s prior offers but still below the union’s stated goal of 40%.