Mortgage rates are too high to move. Here are four stocks that benefit, according to a money manager.

By Steve Goldstein

Critical information for the U.S. trading day

It's a big day for the economy, with data on inflation and the latest Fed minutes due for release. More on that later.

But first let's discuss the housing market, and this startling chart.

It shows the huge gap between mortgage rates, and the rates that Americans are actually paying -- a gap that hasn't been this wide since the early 1980s, back when mortgage rates reached as high as 18%. At the end of 2022, the effective mortgage rate was just 3.48%, so no one is going to want to pay 6.5% if they can avoid it. And, they aren't, with mortgage application demand down about 30% from a year ago.

Milwaukee-based Fiduciary Management, which manages about $14 billion in assets, makes that point in its review of the first quarter. The firm says it's "particularly attracted" to the repair and remodel market.

Homeowners have strong balance sheets and built up significant equity as home prices have appreciated. Low ticket R&R, it says, has historically been resilient during periods of economic weakness. And there's a need to remodel, given the median age of an occupied home being around 40 years. Plus, as seen in the chart above, locked-in mortgages as well as limited home supply have discouraged moving -- likely leading homeowners to invest more in their current homes.

The firm notes the dynamics in the U.K. are similar, with an even older housing stock (70 year), a constrained supply of new homes, an aging population and people staying in their homes longer.

So which companies benefit? It's previously highlighted three -- Simpson Manufacturing (SSD), which makes wood and concrete construction products; Ferguson , the world's largest distributor of plumbing and heating products to trade professionals; and Howden Joinery Group , the U.K.'s largest supplier of fitted kitchens. In the fourth quarter, it bought Fortune Brands (FBIN), which has a portfolio of branded building products including Moen and Master Lock, and which the money manager says trades at only 14 times estimated 2024 earnings. R&R accounts for more than two-thirds of Fortune Brands' revenue.

The buzz

Consumer prices at the headline level rose 5% year-over-year, the smallest increase since May 2021, while the core rose 5.6% year-over-year.

U.S. stock futures picked up after the CPI data, with the S&P 500 contract rising 0.5% and the Nasdaq 100 futures contract adding 0.7%. The yield on the 10-year Treasury fell to 3.36%.

Besides the CPI data, there's also the Fed minutes due for release, at 2 p.m.

On the sidelines of the spring meetings of the International Monetary Fund and the World Bank, finance ministers from the Group of 7 nations will assess their efforts to help Ukraine and sanction Russia.

Berkshire Hathaway (BRKA) CEO Warren Buffett was being interviewed by CNBC from Japan, where he told the Nikkei newspaper that he had increased the company's stakes in five trading houses

Emerson Electric (EMR) is in advanced talks to buy National Instruments (NATI) for about $60 a share, Bloomberg reported, citing people familiar with the matter. Fortive (FTV)also had been bidding for National Instruments, the report said.

Best of the web

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Top tickers

Here were the most active stock-market tickers as of 6 a.m. Eastern.

Ticker  Security name 
BUD     Anheuser-Busch InBev 
TSLA    Tesla 
AMC     AMC Entertainment 
BBBY    Bed Bath & Beyond 
GME     GameStop 
MULN    Mullen Automotive 
NIO     Nio 
APE     AMC Entertainment preferreds 
AAPL    Apple 
HKD     AMTD Digital 

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-Steve Goldstein

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04-12-23 0927ET

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