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HW 30 dives in wake of government shutdown

Analyst: Mortgage industry can handle short-term effects

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Housing stocks and banking giants on the HW 30 spiraled downward Monday as the market reacted to the government inching closer to a complete shutdown.

Earlier in the day, many mortgage experts pointed out that the industry has the tools to withstand a short-term government shutdown, but a prolonged period may lead to more serious consequences. Still, the HW 30 as a whole dipped 0.65% at the close of market.

In the wake of Capitol Hill gearing up for a government freeze, all indexes edged down with the Dow Jones, Nasdaq and S&P 500 remaining unchanged and dropping 0.27% and 0.60%, respectively.

"The focus this week will therefore be whether a government shutdown can be averted and if not, how long it will last," said NewOak president and cofounder James Frischling.

He added, "But this game of chicken is the first of a double-feature, because Congress must agree by October 17th to increase the $16.7 trillion on federal borrowing or the U.S. will default on its debt. While default is unthinkable, the concerns add to uncertainty, and uncertainty doesn’t help the economic recovery."

In the financial institutions sector, all stocks had a rough day.

Bank of America (BAC) dropped 0.72% for the day after the mega bank increased its price target on shares of Yahoo! to $38. Over the past month, the stock has dropped 2.61%.

JPMorgan Chase (JPM), another leading lender on the index, also saw a substantial drop on Monday, falling 1.06% for the day. The institution is not only dealing with a government shutdown, but also a multibillion dollar mortgage-backed securities lawsuit.

Wells Fargo (WFC) also underperformed on Monday, ending the day down 0.65%

After a lull on Friday, homebuilders began to wind down on the index. D.R. Horton (DHI) fell 1.02%, while Lennar Corp. (LEN) followed suit, falling 1.28% for the day. Homebuilder Toll Brothers (TOL) kept its momentum, increasing 0.22% for the day.

The last two months have posed a constant challenge for the mortgage real estate investment sector. First, the Federal Reserve decided to continue purchasing mortgage-backed securities, shocking the market.

The debt ceiling debate also continues to linger. All of these factors led to a hectic day on Wall Street.

mREIT American Capital Agency (AGNC) dropped a substantial 1.31% for the day, while Annaly Capital Management (NLY) dropped 0.43%.

The final two mREIT-stocks on the index, Redwood Trust (RWT) and Two Harbors (TWO), also dipped on Monday. Redwood ended the day down 1.89%, while Two Harbor declined 0.82%. 

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