Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why the Dow Will Close Higher

Blue-chip stocks are making up at least some of the ground lost over the last few weeks, thanks to better-than-expected data on durable-goods orders and home sales. With roughly an hour left in the trading session, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is up by 107 points, or 0.73%.

A bevy of reports from the housing sector seems to be the clear impetus for investors' optimism. The Federal Housing Finance Agency released statistics (link opens PDF) this morning showing that home prices around the country rose by 0.7% in April over the preceding month and 7.4% from the same month last year. The direction of home prices was confirmed by a separate Standard & Poor's report (link opens PDF) that estimated sequential and annual increases of 2.5% and 12.1%, respectively.

According to an economist quoted by Bloomberg News: "Housing's doing really well and I don't think the backup in mortgage rates to date is going to derail it. We're still well off the highs, but price increases could continue for the next several years."

Furthermore, the Department of Commerce today released its estimate (link opens PDF) for new-home sales in the month of May. The data showed that sales of new single-family houses came in at a seasonally adjusted annual rate of 476,000 last month. That's 2.1% better than the revised rate for April and a staggering 29% higher than May of 2012.

And if this weren't enough, the nation's third-largest homebuilder by unit sales, Lennar (NYSE: LEN  ) , released earnings for its fiscal second quarter. Thanks in large part to the preceding trends, Lennar had a good quarter: Among other things, its year-over-year deliveries of new homes surged by 39%, new orders rose by 27%, and its backlog spiked 55%.

As CEO Stuart Miller observed, "Against the backdrop of recent investor concerns over mortgage rate increases, we believe that our second quarter results together with real time feedback from our field associates continue to point toward a solid housing recovery."

On a separate economic front, the Department of Commerce reported (link opens PDF) this morning that new orders for manufactured economic goods -- an important economic gauge -- increased last month by 3.6% over April. And the Commerce Board said its index of consumer confidence rose to 81.4 this month from a reading of 74.3 in May. The measure is now at its highest level since January of 2008.

With all this data in mind, it's little surprise that stocks are reclaiming lost ground today. At present, 27 of the Dow's 30 components are in the green, with only MicrosoftMerck, and UnitedHealth Group down.

The best-performing component is Bank of America (NYSE: BAC  ) , the nation's second-largest bank by assets. B of A's performance, as well as that of other banks, is tied in large part to the health of the housing market. Higher home prices increase the value of collateral and reduce delinquency and foreclosure rates. And higher new-home sales boost mortgage-underwriting activity -- a lucrative source of non-interest income for most banks. At present, shares of Bank of America are up by 3%.

Meanwhile, one of the worst-performing stocks in the broader market today is Barnes & Noble (NYSE: BKS  ) , down more than 17%. The ailing bookseller announced its fiscal fourth-quarter earnings today, revealing just how much trouble it's in. Revenue in its Nook division fell by 34% for the quarter, while same-store sales dropped 8.8%. In response, the company said it will stop producing the tablet versions of its Nook product line.

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: 2508955, ~/Articles/ArticleHandler.aspx, 9/30/2016 4:36:29 PM

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 Moments ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

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

9/30/2016 4:20 PM
^DJI $18308.15 Up +164.70 +0.91%
BAC $15.65 Up +0.49 +3.23%
Bank of America CAPS Rating: ****
BKS $11.30 Up +0.31 +2.82%
Barnes and Noble CAPS Rating: *
LEN $42.34 Up +0.15 +0.36%
Lennar CAPS Rating: **