Exploding Home Prices Support Stocks

Blue-chip stocks are holding onto record highs this afternoon after new data showed that home prices are growing at the fastest rate in nearly seven years. With roughly an hour left in the trading session, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is up 10 points, while the S&P 500 (SNPINDEX: ^GSPC  ) is up by about two points.

The S&P/Case-Shiller 20-city index of home prices for the month of February was released this morning. The data showed that home prices in the nation's largest metropolitan areas increased by 0.3% over the preceding month and 9.3% over the same month last year. It was the largest such improvement since May 2006. According to an economist quoted by Bloomberg News, "The recent run up in prices probably has a lot to do with the lack of supply."

Shares of homebuilders are nevertheless lower on the news, with the industry's largest player, DR Horton (NYSE: DHI  ) , off by 2.3% at the time of writing. The ironic reaction to these stocks is likely the result of the sector's recent run-up in price. As my colleague Rick Munarriz noted over the weekend, homebuilders were some of the hottest stocks in the market last week following DR Horton's blowout quarterly earnings.

In addition to positive news out of the housing sector, there's also reason to believe that Americans are feeling more optimistic about the economy than expected. The Conference Board released figures for its consumer confidence index for the month of April. The figure came in at 68.1 compared with an upwardly revised reading of 61.9 for the preceding month. Economists surveyed by MarketWatch had expected it to be 61.3. According to the organization's director of economic indicators:

Consumer Confidence improved in April, as consumers' expectations about the short-term economic outlook and their income prospects improved. However, consumers' confidence has been challenged several times over the past few months by such events as the fiscal cliff, the payroll tax hike and the sequester. Thus, while expectations appear to have bounced back, it is too soon to tell if confidence is actually on the mend.

In terms of individual stocks, Verizon (NYSE: VZ  ) is among the best-performing stocks on the Dow. Fellow Fool Doug Ehrman recently discussed how the company's investment strategy -- centered around "bringing broadcast capabilities to wireless" -- is disrupting the cable industry. If the telecommunications giant succeeds in these endeavors, it stands to profit tremendously.

Alternatively, the worst-performing component on the blue-chip index is Pfizer (NYSE: PFE  ) , which is down by 3.7%. The pharmaceuticals giant reported earnings this morning that missed analyst estimates. Excluding one-time items, EPS came in at $0.54 per share, missing the consensus forecast by $0.02. In addition, Pfizer lowered its earnings forecast for the remainder of the year. To read more about this, check out Dan Dzombak's take on it here.

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DHI $32.63 Down -0.04 -0.12%
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PFE $34.77 Down -0.05 -0.14%
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VZ $52.75 Up +0.22 +0.42%
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