Five interesting things that Hodges Capital research analysts discovered this week...

#1 REGIONAL BURDEN: The global commercial real estate market is worth $20 trillion, and regional banks hold 80% of its debt. Five to ten office towers each month are newly at risk of defaulting because of low occupancy, expiring leases, or maturing debt refinanced at a higher rate, Manus Clancy of data firm Trepp told The Wall Street Journal.

#2 PACK LEADERS: The top 10 stocks in the S&P 500 have accounted for 96% of the Index’s returns this year as of the end of September (Hedgeye).

#3 DON’T BE A-FREIGHT: With ocean container freight rates down as much as 90% since early 2022, carriers are removing capacity. Container capacity has been reduced by 7% in September compared to the prior year, but it has yet to make up for the modest demand. U.S. shippers (retailers and manufacturers) are seeing their ocean freight rates nearly cut in half this year. Spot rates have fallen below contract rates again (RBC Capital).

#4 PULLING ITS WEIGHT: The most significant positive divergence between a sector’s earnings and market cap weight is in Energy (8.7% vs. 4.7%). The greatest negative divergences are in the Technology sector (18.3% vs. 27.5%) (Hedgeye).

#5 HEALTHY COST: Health insurance costs are expected to surge by as much as 6.5% next year, according to a recent survey from consulting firm Mercer. Healthcare costs have long been a major expense for U.S. employers, with the cost of covering an employee running an average of $14,000 per year, according to Mercer — and over $22,000 per year for a family. It’s why a 6% increase can make the balance sheet look as scary as a bad diagnosis. In the past decade, health insurance rates have typically increased by only 3-5% each year. In 2015, the average cost of healthcare plans per employee was around $11,500. To lower costs, Walmart recently expanded virtual primary care coverage to the vast majority of its 2 million employees, which the company expects to reduce healthcare expenses by as much as 11%. If the nation’s largest private employer serves as any indication, your next doctor’s appointment may be a Zoom call (The Daily Upside).

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