Slip in New-Home Sales Pulls Some Dow Stocks Lower

This morning it was announced that new-home sales declined in October, while September's numbers were revised downward. New single-family home sales fell last month by 0.3% from September, and when adjusted for seasonal factors, new-home supply is now 147,000. At current sales rates, it would take 4.8 months to clear the inventory. On a positive note, the median price for a new home sold in October was $237,000, a 5.7% increase from this time last year.

The housing numbers, plus some negative comments from famed investor Warren Buffet, led the Dow Jones Industrial Average (DJINDICES: ^DJI  ) to a rocky start this morning, but the index has since moved higher. As of 12:50 p.m. EST, the Dow is up 68 points, or 0.5%. So far during today's trading session, just seven of the Dow's 30 components are in the red, and three of the losers can be tied directly to the housing numbers.

Dow stocks taking a hit
Due to the poor housing numbers, both of the Dow's banking stocks are getting hit today. Bank of America (NYSE: BAC  ) fell about 1% today before clawing its way back to breakeven, while JPMorgan Chase (NYSE: JPM  ) is down 0.5%. With new-home sales slowing down, the banks may have to rely on riskier operations in order to turn a profit, and most of us remember how well those operations have worked out. But more importantly, our economy needs homes to be sold and new households created in order for it to move forward. Banks' fortunes are probably tied to the health of the overall economy more than those of any other sector.

Another Dow component praying for a housing-market recovery is Home Depot (NYSE: HD  ) . Shares traded sharply downward this morning but have since made their way back to square one. The stock has been on a tear recently and is up 52% year to date. While today's numbers weren't good for Home Depot, they could be much worse. Home Depot's bread and butter is the small contractor, which is not building new homes, but rather fixing and replacing items and updating rooms in older homes. The more important indication for Home Depot is the sales price of existing homes. When homes are worth more money, people are traditionally willing to put more money into them, thus leading contractors to spend more money. This pullback for Home Depot should be temporary, and even though the stock price is at a 52-week high, I still believe it's a buy today.

Foolishly investing
With big finance firms still trading at deep discounts to their historic norms, investors everywhere are wondering if this is the new normal or whether finance stocks are a screaming buy today. The answer depends on the company, so to help you figure out whether JPMorgan is a buy today, I invite you to read our premium research report on the company today. Click here now for instant access!

Or, to learn more about the most talked-about bank out there, check out our in-depth company report on Bank of America. The report details Bank of America's prospects, including three reasons to buy and three reasons to sell. Just click here to get access.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2130764, ~/Articles/ArticleHandler.aspx, 10/22/2016 9:35:51 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 12 hours ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
BAC $16.67 Up +0.11 +0.66%
Bank of America CAPS Rating: ****
HD $126.60 Up +0.35 +0.28%
Home Depot CAPS Rating: ****
JPM $68.49 Up +0.23 +0.34%
JPMorgan Chase CAPS Rating: ****