REIT ETF Benchmarks Tank After Inflationary CPI Data

The benchmark real estate investment trust (REIT) exchange-traded funds (ETFs) sold off Tuesday along with most of the rest of the stock market after the consumer price index (CPI) came in higher than expected.

The Real Estate Select Sector SPDR Fund XLRE tanked by 3.80%. The iShares U.S. Real Estate ETF IYR got hit by 3.70%.

The S&P 500 dropped by 4.32%. and the Nasdaq Composite Index slipped by 5.16%. Relatively speaking, the REIT funds outperformed the broader indexes. Still, it’s unpleasant for an investor to hold securities that have dropped significantly.

The Real Estate Select Sector SPDR fund consists of 34 positions in all. Top holdings include American Tower Corp. AMT, Prologis Inc. PLD and Crown Castle Inc. CCI. Here is the daily price chart:

Despite the heaviness of the selling, the fund managed to stay above the mid-June and mid-July lows. Note that the positive divergences remain in place for the relative strength indicator (RSI). Now that the CPI is out, investors may be waiting to see if the producer price index (PPI) confirms the CPI, which may cause further unloading.

The iShares U. S. Real Estate ETF consists of 83 holdings, so it tracks a more diverse universe of REITs than the Real Estate Select Sector SPDR fund. Nonetheless, its top three positions are just the same — American Tower, ProLogis and Crown Castle Inc. After that, the holdings began to look a bit different between the two ETFs.

This is the daily price chart for the iShares U. S. Real Estate ETF:

The fund sold off but stayed well above those mid-June and mid-July lows. The question will be — can this slightly bullish trend continue after the release of the PPI numbers? Note that the RSI continues to hold a positive divergence with regard to price action.

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