On the heels of a 2% pop in the S&P 500 (SNPINDEX:^GSPC) yesterday, it seemed that despite generally positive news, traders were more than happy to leave their bets off the table in advance of a holiday-shortened week.
Continuing yesterday's bullish theme on housing, the U.S. Commerce Department noted that housing starts advanced 3.6% to an annual rate of 894,000, much better than the 840,000 annual rate economists had been predicting. Combined with yesterday's news, it leads to the belief that low interest rates and rising home prices could lead to a quicker economic recovery than originally expected.
The S&P 500, though, largely shrugged off this news and finished the day fractionally higher by 0.92 points (0.07%) to end at 1,387.81.
As you might expect, homebuilders led the charge higher, with Lennar (NYSE:LEN) advancing better than 3%. Lennar is one of the best-positioned homebuilders to take advantage of an upward trend in housing because of its sector-leading homebuilding margins (23.2%) and its selective nature to build in areas where housing demand drives home sales, not just pricing (as we've seen in many foreclosure-heavy areas).
Oddly enough, though, it was three big losers that dominated news within the S&P 500.
Big-box retailer Best Buy (NYSE:BBY) turned in today's biggest drop, falling 13% after reporting a third-quarter adjusted profit of $0.03 per share when Wall Street had been expecting a profit of $0.13. Including those one-time costs, Best Buy recorded a $10 million loss and a 4.3% decline in same-store sales as "showrooming" continued to hurt results. New CEO Hubert Joly recently unveiled a five-point plan to turn Best Buy's fortunes around, and it appears investors will give him perhaps one quarter to make that happen before they really unleash their fury.
Dow Jones component Hewlett-Packard (NYSE:HPQ) didn't fare much better, down 12%, after noting in its fourth-quarter earnings results that it took an $8.8 billion writedown on its purchase of information management company Autonomy. The impetus to the writedown relates to what HP is describing its 10-Q as "serious accounting improprieties, disclosure failures, and outright misrepresentations at Autonomy Corporation." I'm not sure if this will get HP off the hook for its recent performance, but the simple fact that HP stuck to its previous guidance has to be worth something.
Finally, Cliffs Natural Resources (NYSE:CLF), the largest North American producer of iron ore pellets, which are used in steelmaking, said it will idle some of its production in the U.S. and hold off on mine expansion in Quebec because of weak iron ore pricing. Brokerage firm Goldman Sachs didn't take too kindly to the news and downgraded Cliffs to "sell" from "neutral." Now yielding more than 8%, Cliffs is bound to turn some heads following today's 12% tumble.
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