By Ryan Dezember
Builders FirstSource, one of the hottest stocks of the past year, is getting hammered after reporting a 22.5% decline in first-quarter profit, a sign that high borrowing costs are beginning to slow residential construction.
-- Shares of the building products supplier have stood out among chip makers and tech firms atop the S&P 500 despite the highest interest rates in a generation.
-- They dropped more than 15% today and are on track for their worst day since the March 2020 Covid crash.
JELD-WEN Holding shares are faring even worse after the window and door maker swung to a quarterly loss and cut its financial outlook.
As we expected, a weakening multi-family market and higher mortgage rates driving affordability challenges were headwinds to start the year, " said Builders FirstSource Chief Executive Dave Rush.
The construction market has been surprisingly resilient during the Fed's rate hike cycle, which was launched to cool inflation by slowing the red-hot housing market and the consumption that accompanies booming property values.
Building products stocks have surged under the reasoning that if they were profitable with 7% mortgages, they would make even more when the Fed cut rates. Results from Builders FirstSource and JELD-WEN show that the construction business might finally be buckling under high borrowing costs.
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(END) Dow Jones Newswires
May 07, 2024 11:45 ET (15:45 GMT)
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