Core Viewpoint - Annaly Capital Management (NLY) is rated as a Hold, with a leaning towards Buy for long-term investors, due to expected improvements from yield curve steepening [1] Group 1: Analyst Background - The analyst has over 20 years of experience in quantitative research, financial modeling, and risk management [1] - Focus areas include equity valuation, market trends, and portfolio optimization to identify high-growth investment opportunities [1] - Previous role as Vice President at Barclays involved leading teams in model validation, stress testing, and regulatory finance [1] Group 2: Research Approach - The research is co-authored with a partner, combining complementary strengths to provide high-quality, data-driven insights [1] - The approach integrates rigorous risk management with a long-term perspective on value creation [1] - There is a specific interest in macroeconomic trends, corporate earnings, and financial statement analysis to generate actionable investment ideas [1]

Group 1 - The State Street SPDR S&P Bank ETF (KBE) has reached a 52-week high, increasing by 52.66% from its 52-week low of $44.34 per share, indicating strong momentum for investors [1] - KBE tracks the S&P Banks Select Industry Index, which is a modified equal-weighted index reflecting the performance of publicly traded banking companies, with an annual fee of 0.35% [2] - The banking sector is gaining attention due to rising expectations of an interest rate cut in 2026, influenced by Kevin Warsh's nomination as Fed Chair, which may lead to a steeper yield curve benefiting the fund [3] Group 2 - KBE holds a Zacks ETF Rank 1 (Strong Buy) and has a high-risk outlook, suggesting potential for continued strong performance, supported by a positive weighted alpha of 22.27 [4]

Financial Data and Key Metrics Changes - The company reported earnings available for distribution of $2.35 per diluted share, representing a 12% year-over-year growth [13] - GAAP net income for the year was $567 million, with a return on equity of 8% [14] - Book value at the end of the year was reported at $7 billion, equating to $12.60 per common share, an increase from the previous year [15][16] Business Line Data and Key Metrics Changes - The Genesis business produced just under $5 billion in loans, with earnings up 250% since its acquisition in 2022 [8] - Newrez, the mortgage company, saw year-over-year earnings growth of 13% [8] - Sculptor's AUM grew from $34 billion to $38 billion, with gross inflows of $5.8 billion in 2025 [17][26] Market Data and Key Metrics Changes - The company manages over $100 billion in investable assets, with $63 billion in Rithm Asset Management AUM and $53 billion in balance sheet business [11] - The 10-year Treasury yield increased to approximately 4.30%, while mortgage rates have slightly decreased [16] - San Francisco recorded approximately 9 million sq ft of leasing activity, the strongest annual total since 2019, indicating a recovery in the market [37][39] Company Strategy and Development Direction - The company aims to grow prudently by creating alpha and results for clients, focusing on performance-driven asset management [6][11] - The acquisition of Paramount is seen as a transformational move into the commercial real estate space, with a focus on Class A office buildings [30][32] - Investments in technology and marketing are prioritized to enhance customer experience and operational efficiency [9][46] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in the San Francisco market, particularly driven by AI companies and a return to office momentum [35][39] - The company anticipates a continued steepening of the yield curve, which could benefit its operations [22] - Management remains cautious about competition in the mortgage space, emphasizing a disciplined approach to origination and market share [60][65] Other Important Information - The company has made significant investments in technology, including partnerships with Valon and HomeVision to enhance its servicing and underwriting capabilities [46][47] - The company has a strong focus on maintaining high-quality tenant relationships and enhancing amenities in its real estate portfolio [39] Q&A Session Summary Question: Can you detail the funded volumes, particularly the refi percentage? - The increase in refi volume was driven by market conditions, including a rally in late summer and tighter spreads, leading to expectations of continued growth in the first quarter [58][59] Question: What is the company's view on competition in the mortgage space? - The company acknowledges the competitive nature of the mortgage business but emphasizes its focus on maintaining margins and not engaging in irrational pricing wars [63][65] Question: How did the gain on sale margin improve in the retail channel? - The improvement was attributed to a favorable mix and timing of completions, alongside a focus on maintaining margins in the consumer direct channel [70]

Group 1 - The year 2026 is expected to be favorable for regional banks due to a steepened yield curve, decreasing funding costs, and improving credit quality trends, all of which are positive for the industry's profitability [1]

Core Viewpoint - The financial sector is experiencing a favorable macroeconomic environment, leading to record highs and positive outlooks for 2026, particularly for regional banks due to the steepening yield curve [1][2]. Group 1: Market Trends - The yield curve is expected to steepen, which is beneficial for banks as it leads to better interest rate spreads [2][7]. - If the Federal Reserve cuts interest rates by 25 to 50 basis points before June, it will further support bank stocks, especially regional ones [3]. Group 2: Regulatory Environment - The regulatory landscape has shifted significantly under the current administration, with proposals that are supportive of the banking industry, including the upcoming Basel 3 endgame which could enhance profitability and valuations [4]. - The regulatory changes have been rapid and constructive, indicating a more favorable environment for banks [4]. Group 3: Performance of Different Bank Segments - Money center banks and investment banks have performed exceptionally well this year, largely due to strong capital markets and a robust advisory business, potentially marking this year as the second-best after 2021 [6]. - Regional banks are anticipated to catch up to larger banks in 2026, driven by improved interest income from the steepening yield curve and increased loan growth [7]. Group 4: Loan Growth Expectations - Banks are expected to return to more aggressive lending practices in 2026, with potential upside surprises in loan growth, particularly in commercial and industrial loans and commercial real estate [8].

Economic Outlook - New York Fed President John Williams expressed optimism about the economy, stating that some data is "pretty encouraging" and there is no sign of a sharp deterioration in jobs data [1] - He projected US GDP growth for this year to be between 1.5% and 1.75%, with expectations of growth picking up next year [1] Consumer Sentiment and Housing Market - The University of Michigan's consumer sentiment index for December was unexpectedly revised downward by -0.4 to 52.9, falling short of expectations [2] - Existing home sales in the US for November rose by +0.5% month-over-month to a 9-month high of 4.13 million, although this was below the expected 4.15 million [2][4] Stock Market Performance - Stock indexes showed positive movement, with the S&P 500 up by +0.67%, the Dow Jones up by +0.56%, and the Nasdaq 100 up by +0.94% [6] - A rally in cloud infrastructure stocks, particularly Oracle which rose by more than 7%, contributed to improved market sentiment [5][13] Bond Market Dynamics - Higher bond yields are limiting stock gains, with the 10-year T-note yield increasing by +2 basis points to 4.14% [3] - The yield curve has steepened since the last FOMC meeting, impacting T-note prices negatively due to increased demand for short-term government debt [10] International Markets - Overseas stock markets also experienced gains, with the Euro Stoxx 50 up by +0.40%, China's Shanghai Composite up by +0.36%, and Japan's Nikkei Stock 225 up by +1.03% [8] Company-Specific Movements - Carnival Corp reported Q2 adjusted EPS of 34 cents, exceeding consensus expectations of 24 cents, leading to a stock increase of more than +9% [16] - Whitefiber Inc saw a stock increase of more than +7% following a significant co-location agreement, representing around $865 million in contracted revenue [17] - Nike's stock fell by more than -8% after forecasting a decline in Q3 revenue and gross margins due to ongoing weakness in China [19] - Lamb Weston Holdings forecasted full-year net sales below consensus, leading to a stock decline of more than -23% [18]

Economic Indicators - Weekly initial unemployment claims in the US are expected to fall by 11,000 to 225,000 [1] - November CPI is projected to increase by 3.1% year-on-year, while core CPI is expected to rise by 3.0% year-on-year [1] - November existing home sales are anticipated to increase by 1.2% month-on-month to 4.15 million [1] - The University of Michigan's December consumer sentiment index is expected to be revised upward by 0.2 to 53.5 from the previously reported 53.3 [1] Labor Market - November nonfarm payrolls rose by 64,000, exceeding expectations of 50,000, while October nonfarm payrolls fell by 105,000, worse than the expected decline of 25,000 [3] - The unemployment rate in November increased by 0.1 to a four-year high of 4.6% [3] - November average hourly earnings rose by 0.1% month-on-month and 3.5% year-on-year, which is the smallest year-on-year increase in 4.5 years [2][4] Stock Market Performance - The S&P 500 Index fell by 0.32%, the Dow Jones by 0.293%, and the Nasdaq 100 by 0.14% [6] - Stocks are under pressure due to sluggish economic indicators, including a rise in the unemployment rate and stagnation in retail sales [5] - Energy producers are experiencing significant declines, with WTI crude oil falling over 3% to a 4.75-year low, impacting the broader market [5][14] International Markets - Overseas stock markets are also lower, with the Euro Stoxx 50 down by 0.68%, China's Shanghai Composite down by 1.11%, and Japan's Nikkei Stock 225 down by 1.56% [7] Interest Rates and Bonds - The 10-year T-note yield decreased by 0.8 basis points to 4.165%, influenced by the rise in unemployment and lower wage growth [8] - The 10-year breakeven inflation rate fell to a 1.5-week low of 2.240%, indicating falling inflation expectations [8] Company-Specific Movements - Pfizer Inc is down more than 4% after forecasting 2026 revenue below consensus estimates [16] - Humana is down more than 2% after its full-year adjusted EPS forecast fell short of expectations [16] - Archer-Daniels-Midland is down more than 2% following a downgrade by Morgan Stanley [17] - Cognex is up more than 5% after a double-upgrade by Goldman Sachs [17] - Ford Motor is up more than 1% after announcing a shift in production focus from electric to gas and hybrid vehicles [19]

For investors seeking momentum, State Street SPDR S&P Regional Banking ETF KRE is probably on the radar. The fund just hit a 52-week high and rose 43.3% from its 52-week low price of $47.06/share.But, are more gains in store for this ETF? Let’s take a quick look at the fund and the near-term outlook to get a better idea of where it might head:KRE in FocusThe underlying S&P Regional Banks Select Industry Index represents the regional banks segment of the S&P Total Market Index. The product charges 35 bps in ...

Core Viewpoint - Rising long-end yields in the Treasury market are defying historical trends and could indicate potential issues for investors, as highlighted by Apollo economist Torsten Slok [1][3][9] Group 1: Current Market Conditions - Since the Federal Reserve began cutting its policy interest-rate target in September 2024, long-dated Treasury yields have remained stubbornly high [1][3] - Yields on the 10-year and 30-year Treasury securities are currently lower than at the start of 2025, suggesting a potential for price appreciation in the bond market for the first time since 2020 [4] - The yield curve is steepening, with 30-year yields rising faster than 10-year yields, which is concerning as it indicates investors are demanding a greater premium for long-dated U.S. debt [8] Group 2: Historical Relationships - Long-end yields have broken away from their historical relationship with short-end rates, which typically move in tandem [5][6] - A longstanding correlation between long-end yields and crude oil prices is also deteriorating, indicating broader market shifts [7] Group 3: Implications for Investors - Investors across all asset classes are urged to consider the implications of the steepening yield curve and the unusual behavior of long-end yields [9]

Core Viewpoint - Short-dated U.S. Treasury yields are expected to decline due to anticipated Federal Reserve rate cuts, while long-term yields remain stable due to persistent inflation and fiscal concerns [1][4]. Group 1: Treasury Yields and Federal Reserve Expectations - A Reuters poll indicates that short-dated Treasury yields will decrease as the market anticipates rate cuts from the Federal Reserve [1]. - The benchmark U.S. 10-year Treasury yield is projected to trade around 4.10% in three to six months and rise to 4.17% in a year [4]. - Analysts express skepticism about the current pricing of rate cuts, suggesting that the Fed may only cut rates once more this year, contrary to market expectations of two cuts [6]. Group 2: Economic Conditions and Fiscal Concerns - High long-term yields pose a risk to the U.S. fiscal position, with estimates suggesting that tax and spending reforms could increase the national debt by over $3 trillion in the next decade [2]. - Current economic growth and inflation rates above the Fed's 2% target indicate that monetary policy may not be sufficiently restrictive [3]. - The ongoing government shutdown complicates the Fed's ability to make informed policy decisions, increasing the risk of missteps [4]. Group 3: Yield Curve Dynamics - The 2-year Treasury yield is expected to remain around its current level of 3.47% at year-end, with a gradual decline to 3.35% in a year [7]. - This scenario would lead to a steepening of the yield curve, with the spread between 10- and 2-year yields projected to increase from approximately 50 basis points to 82 basis points in a year [7].