Marketbites: Apple Announces Multibillion-Dollar Deal
Portfolio Manager Commentary:
Stocks fell Tuesday as ongoing debt ceiling discussions appeared to yield little progress. Some traders interpreted the lack of any major updates on negotiations as a sign that lawmakers, perhaps, are struggling to progress as hoped. Investors have been closely eyeing debt-limit negotiations in Washington, hoping for more certainty as the so-called June 1 X-date expected by Treasury Secretary Janet Yellen fast approaches. Some House Republicans on Tuesday questioned the accuracy of this projected default date.
While lawmakers should achieve a resolution to the debt ceiling woes, Aspiriant's Sandi Bragar remains cautious as recession fears persist. Recent history suggests a downturn will likely come when the Federal Reserve completes its hiking cycle, she added. "Everyone just feels like there is a party in the market and wanting to participate," Bragar added. "I don't think that it's really time to get too excited just yet. There's reason to be cautious here."
Elsewhere, Apple moved 1.5% lower after announcing a multibillion-dollar chip production deal with Broadcom. The chip stock gained 1.2%. Yelp popped 5.7% as an activist investor called for the company to explore a sale.
Chart of the Day:
The rental-market boom made millions for syndicators and their investors through rising rents and escalating property values. Average rent for a one-bedroom apartment in Phoenix has increased 37% since January 2021, driven by pandemic migration and a limited housing supply, according to the rental listing site Zumper. “There was this huge mania where people wouldn’t even look at the unit,” said Colin Ralls, principal of Phoenix-based property manager Acora Asset Management. Prospective tenants would just apply, he said.
Now, many syndicators are racing to either raise funds or sell properties before tipping into foreclosure. Most hold balloon-payment loans that require repayment when they come due this year or next. Those syndicators face large payouts at a time when getting new, more affordable property loans will be difficult. Even firms with multibillion-dollar portfolios have used syndication to buy apartment buildings that no longer make enough money to cover debt payments, bond documents show.
“The bubble is going to start popping if these guys can’t get out of these deals in time,” said Ralls, of Acora Asset.
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