Shares of Rocket Companies (NYSE:RKT) surged 11.2% on Monday after interest rates retreated from their recent highs.
After surging above 1.6% last week, the yield on the 10-year Treasury note fell back near 1.4% on Monday. The 10-year note is an important benchmark that tends to impact mortgage rates.
As a leading mortgage originator, Rocket Companies is highly exposed to interest rate fluctuations. When rates rise suddenly, mortgage refinancings tend to decline, as homeowners wait (and hope) for rates to fall again.
A dramatic decline in refinancings would weigh heavily on Rocket's earnings. With this risk moderating on Monday, investors bid up Rocket's shares.
Rocket Companies is fresh off a blockbuster fourth quarter that saw its revenue and adjusted profits soar 144% and 350%, respectively. The mortgage titan made so much money that it declared a $1.11 special dividend. For a stock that closed at $24.30 on Monday, that's quite a lucrative cash payout for investors.
Better still, if interest rates (and, by extension, mortgage rates) stay low, more good times could lie ahead for Rocket Companies and its shareowners.