Rocket Companies (RKT) Stock Surges As December Rate Cut Odds Fuel Mortgage Optimism

Rocket Companies Inc (RKT) shares traded higher on Tuesday, propelled by a shift in Federal Reserve expectations. Here’s what investors need to know.

• RKT stock is racing ahead of the pack. See the complete data here.

What To Know: With traders now pricing in an 81% probability of a December rate cut following dovish comments from Fed Gov. Christopher Waller regarding labor market softness, the macro environment is pivoting in Rocket's favor.

A December rate cut is advantageous for Rocket's specific business model beyond general housing sentiment. First, it directly lowers Rocket's cost of funding, improving the spreads on the loans they hold before sale.

Second, it acts as a catalyst for Net Rate Lock Volume, which Rocket reported rose 20% YoY to $35.8 billion in the third quarter. A cut would unfreeze fence-sitters considering buying a home, driving volume into Rocket’s scalable platform, meaning incremental volume significantly boosts profitability.

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Most importantly, a rate cut reignites the refinancing channel. Refinancing loans typically carry higher margins and lower acquisition costs than purchase loans.

While lower rates can decrease the value of Rocket's massive $613 billion Mortgage Servicing Rights portfolio due to prepayment risk, Rocket's recapture technology turns this risk into revenue.

They can aggressively transition existing customers in their servicing portfolio into new loans, generating fresh origination fees that far outweigh the degradation in MSR value. Combined with their recent Redfin momentum, a cheaper rate environment validates Rocket’s volume-centric strategy.

Benzinga Edge Rankings: Data from Benzinga Edge underscores this bullish price action, currently assigning Rocket Companies (RKT) a robust Momentum score of 83.57.

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RKT Price Action: Rocket Companies (RKT) shares closed Tuesday up 8.44% at $19.66, according to Benzinga Pro data.

How To Buy RKT Stock

By now, you're likely curious about how to participate in the market for Rocket Companies (RKT) ? be it to purchase shares or even attempt to bet against the company.

Buying shares is typically done through a brokerage account. You can find a list of possible trading platforms here. Many will allow you to buy “fractional shares,” which allows you to own portions of stock without buying an entire share.

In the case of Rocket Companies (RKT), which traded at $19.65 at some point on Tuesday, $100 would buy you 5.09 shares of stock.

If you're looking to bet against a company, the process is more complex. You'll need access to an options trading platform or a broker who will allow you to “go short” a share of stock by lending you the shares to sell. The process of shorting a stock can be found at this resource. Otherwise, if your broker allows you to trade options, you can either buy a put option or sell a call option at a strike price above where shares are currently trading ? either way, it allows you to profit from the share price decline.

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