Markets Move Higher Despite Weak Housing Data

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

This morning, the data on new home sales was released, and while many economists expected the rate of sales to fall slightly from June's 497,000 mark, they were still estimating the number to come in around 485,000 for July. But, the actual result has more than shocked a number of market participants today as the U.S. government reported that the seasonally adjusted rate for July was only 394,000. The result was well under the estimates and a 13.4% decline below June's revised figure of 455,000.  

Despite the poor economic data, the major indexes are all moving higher today. As of 12:45 p.m. EDT the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is higher by 11 points, or 0.08%, while the S&P 500 is up 0.16% and the NASDAQ is higher by 0.33%. But, although the major indexes are shaking off the poor housing data, a number of stocks throughout the market are tanking because of it.

Shares of both DR Horton (NYSE: DHI  ) and Lennar (NYSE: LEN  ) are moving lower as a result of the report. DR is currently down 3.42% while Lennar is off by 2.74%. The housing data reported today will certainly show up in the home builder's quarterly results, but as housing sentiment has increased over the past few months as it looked like we were turning the corner, investors began pouring into these stocks. Since the market is a forward-looking entity, future sales and profit expectations for what a company will post play a large role in determining the share price. Today's report indicates that the homebuilder's sales and profits may not be as good as many investors previously expected, and that's causing the stock to fall.

Home Depot (NYSE: HD  ) is also losing ground today, likely the result of the housing report. Shares are down 0.7% as it seems the housing market may be cooling off. Most economists consider a monthly housing sales number of 700,000 to be a healthy market. Today's report came in well below that number as rising interest rates have likely kept some possible buyers out of the market, meaning less new home owners which could be spending money at Home Depot. Additionally, rising interest rates will not only keep home sales low, but raise the monthly payments of those individuals who are buying a new home. This lowers the amount of extra cash they have sitting around every month and therefore reducing there disposable income. Along with other retailers, that's another area in which Home Depot may be hurt by rising rates in the long run.

More Foolish insight
Wall Street has been getting rich on trading floor tips for decades -- and for decades, those tips have been "for industry insiders only." But not anymore. Our top technology analyst recently infiltrated one of the finance world's most exclusive gatherings... and left with three incredible investment opportunities, straight from the CEOs. These are profit-building strategies Main Street isn't meant to hear about -- so act now before someone shuts us up. Click if you want "industry insider" earnings -- NOW!


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.

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: 2607741, ~/Articles/ArticleHandler.aspx, 10/21/2014 5:45:21 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...


Advertisement