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Why the Dow Could Close Higher

John Maxfield
November 20, 2012

Positive economic news on the housing front has failed to outweigh continued concerns about corporate profits this morning. Following a massive rally yesterday, the markets were down throughout the morning and are now flat. As of 11:55 a.m. EST, the Dow Jones Industrial Average (INDEX: ^DJI  ) is up a meager eight points.

Housing recovery continues on
Data released this morning suggests that the housing recovery continues to gain momentum. According to the U.S. Department of Commerce, domestic homebuilding activity rose to its highest level since July 2008. The data shows that housing starts increased 3.6% in October compared with the previous month. Since the same month last year, housing starts have increased by a staggering 41.9%. On a seasonally adjusted basis, construction began on 894,000 houses. Economists had predicted a more modest 833,000.

This adds to a growing chorus of evidence suggesting that housing has turned the corner. Data released by the National Association of Realtors yesterday showed that sales of existing homes last month increased 2.1% over September and 10.9% over the same month last year. As I noted yesterday, the association's chief economist even went so far as to say that we "may have a persistent inventory shortage situation next year."

To see why our own Morgan Housel thinks a housing recovery is evidence of a "coming boom," click here.

Today's best- and worst-performing stocks
Shares in Hewlett-Packard (NYSE: HPQ  ) are down 10.3% to a new 10-year low following the company's fourth-quarter earnings release. For the quarter, the company reported a $6.9 billion loss on $30 billion in revenue. Both figures represent significant declines from the same period a year ago.

More significantly, the company wrote off $8.8 billion in goodwill associated with its acquisition of Autonomy, a U.K. software maker for which HP paid more than $10 billion in 2011. HP CEO Meg Whitman is leveling allegations of fraud against the acquired company's former management, saying that an internal investigation revealed "se