Shares of major homebuilders spiked Tuesday after the Federal Reserve announced that was cutting its benchmark interest rate by 50 basis points to between 1% and 1.25% to support the economy as the coronavirus spreads.
Shares of Lennar rose 4.8% to $65.62, PulteGroup rose 3.3% to $42.91, D.R. Horton was gaining 3.33% to $56.66, KB Home rose 3% to $35.31 and Toll Brothers gained 1.6% to $39.35.
Homebuilders were rising after the 10-year Treasury yield slumped to a record intraday low. Mortgage rates tend to follow the slope of the Treasury yield. Lower mortgage rates will benefit homebuilders and homebuyers.
The average rate on the 30-year fixed mortgage was 3.13% on Monday, matching its record low, according to Mortgage News Daily.
Stocks were down sharply Tuesday after Federal Reserve Chairman Jerome Powell explained the central bank’s reasoning for cutting interest rates 50 basis points in a surprise move meant to support financial markets.
The Dow Jones Industrial Average was down 362 points, or 1.35%, to 26,342, the S&P 500 tumbled 1% and the Nasdaq declined 1.1%.
Powell said at a press conference that “we’ve seen a broader spread of the virus … and so we saw a risk to the outlook for the economy and chose to act.”
He added the Fed “judged that the risks to the U.S. outlook have changed materially” and the central bank “can and will do our part, however, to keep the U.S. economy strong as we meet this challenge.”