The Federal Reserve is about to lower interest rates for the first time this year, and stocks from homebuilders to mortgage providers are poised to get a big boost. The market consensus based on where interest rates futures are trading is that the Fed will lower the benchmark fed funds rate by a quarter percentage point, to 4.00%-4.25%, when it wraps up its two-day meeting Wednesday, according to the CME Group’s FedWatch tool. This, in turn, should drive short-term Treasury yields like the 2-year lower. CNBC Pro screened U.S. stocks for the past 10 years, looking for those with the highest inverse correlation with the two-year Treasury yield, the part of the yield curve most sensitive to monetary policy. In other words, as short-term yields go down, these stocks tend to go up. Mortgage lenders and servicers Mr Cooper and Rocket Companies made the screen. In March, Rocket agreed to buy Mr Cooper for $9.4 billion in an all-stock deal expected to close late this year. Rocket Companies, whose shares have already rallied more than 80% this year, could have more room to go on the back of Fed rate cuts. Lower rates make loans cheaper, boosting demand for mortgages and encouraging some homeowners to refinance existing loans. Homebuilders Lennar , Toll Brothers and Meritage Homes also have an elevated correlation with short-term Treasury yields. Rate cuts generally support homebuilders by making housing more affordable and boosting demand. Electrical equipment manufacturers nVent Electric and Monolithic Power Systems also had high correlations, as did water utility Essential Utilities .
