Key Highlights

● Host Hotels rose Friday as REITs rallied while Treasury yields eased.

● The company declared a quarterly dividend of $0.20 per share.

● The S&P 500 fell 84.62 points to 7,659.44, yet six of 11 sectors gained.

● Housing starts arrive Oct 20, and the Fed decides on rates Oct 28.

Host gains on the day

Host Hotels & Resorts (NASDAQ:HST) rose on Friday as REITs rallied while Treasury yields eased, according to market data. The company also declared a quarterly dividend of $0.20 per share.

Host is the largest lodging real estate investment trust in the United States, owning upscale and luxury hotels operated under brands such as Marriott (NASDAQ:MAR), Hyatt (NYSE:H) and Hilton (NYSE:HLT). As a REIT, it is required to distribute most of its taxable income to shareholders, which makes dividends a central part of its appeal.

Yields eased

Interest rates are a major driver of REIT shares, since investors weigh their dividends against yields on safer government bonds, and higher borrowing costs raise the cost of financing property. On Friday, the 10-year Treasury yield eased to roughly 5.1, per market data, and ended the week lower. Earlier in October, the 10-year topped 5.3, its highest level since 2002.

The 30-year yield ended at about 5.42, and the 2-year yield posted a third straight weekly decline.

The move in bonds came even as inflation data stayed hot. September's consumer price index, released Wednesday, ran ahead of expectations. On Friday, the government said September import and export prices both rose more than forecast.

The Fed's next step

Federal Reserve Chair Kevin Warsh, speaking at an IMF gathering in Bangkok, declined to preview the October decision. "I don't prejudge meetings," he said. The Fed raised rates by a quarter point in September, its first hike in three years. Odds of an October move fell sharply after spiking on Wednesday's CPI report, though markets still price a hike by December, and Bank of America still expects one this month.

A rotation into rate-sensitive sectors

Host's gain came on a down day for the major indexes. The S&P 500 fell 84.62 points to 7,659.44, the Dow Jones Industrial Average lost 175.28 points to 52,002.41 and the Nasdaq Composite slid 572.99 points to 26,140.03. Six of the S&P 500's 11 sectors finished higher, market reports showed.

Technology bore the brunt of the selling as investors questioned how artificial-intelligence spending will be financed. Money rotated into energy, utilities, consumer staples, health care, financials and real estate investment trusts such as Host.

The consumer picture is mixed for hotel owners. September retail sales came in above expectations, but the Primary Consumer Sentiment Index fell 5.3 points to 45.2, its lowest since October 2011. Gasoline prices are also elevated: the US average is $4.33 a gallon, compared with $3.06 a year ago, as Brent crude climbed to $109.86 a barrel on tensions in the Strait of Hormuz.

Separately, casino operators including MGM Resorts (NYSE:MGM) drew attention after Deutsche Bank cut estimates on weaker Las Vegas trends, a reminder that travel and leisure demand is being closely watched.

Housing Starts and Fed Test Host

Housing starts and building permits for September are due Oct 20, offering another read on the real estate sector. University of Michigan consumer sentiment data arrives Oct 23. The Fed's rate decision on Oct 28 and personal consumption expenditures inflation data on Oct 29 will shape the path of Treasury yields, the biggest swing factor for REITs. Investors will also follow travel-related earnings, including United Airlines (NASDAQ:UAL) on Oct 20.