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Midday Commentary: Preferred stocks skid amid weak economic data; Resource Capital yet to free
By Stephanie N. Rotondo
Phoenix, June 4 - The preferred stock market was swimming in a sea of red early Wednesday, as new economic data failed to meet expectations.
The Wells Fargo Hybrid and Preferred Securities Index was down 100 basis points at mid-morning.
The ADP National Employment Report for May released Wednesday showed that private employers added 179,000 jobs during the month of May. That was down from the 215,000 jobs added in April and well below expectations of 210,000 jobs.
Still, the data indicated that employers needed only 113,000 additional jobs in order to break even with pre-financial crisis levels.
The Commerce Department also released a report showing that the U.S. trade deficit widening to its highest point in just over a year.
The trade deficit grew by 6.9% in the last month.
The number was attributed in part to an increase in imports, especially in consumer goods. However, that could indicate that demand is picking up, which could then result in increased supply domestically - a move that could spur economic growth.
In preferred dealings, Resource Capital Corp.'s $110 million of 8.625% series C fixed-to-floating rate cumulative redeemable preferreds had yet to free as of mid-morning, a trader said.
The issue priced Tuesday.
The trader quoted the new paper at $24.70 bid, $24.77 offered.
Morgan Stanley & Co. LLC and UBS Securities LLC were the joint bookrunners. Deutsche Bank Securities Inc. and Keefe Bruyette & Woods acted as joint lead managers.
The dividend will be fixed until July 30, 2024, at which time it will begin to float at Libor plus 592.7 bps.
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