Sometimes the market is even less predictable than we think. Yesterday, on the heels of a number of positive economic releases, the Dow Jones Industrial Average (^DJI 0.40%) headed lower. And today, after an increasingly rare downbeat reading from the housing sector, the blue chip index is higher. Go figure.
Mixed signals in the housing market
A government report (link opens PDF file) issued today estimates that new single-family home sales fell slightly in October. According to the Commerce Department, sales dropped by 0.3% last month to a seasonally adjusted 368,000 units.
Two things should be noted to put this downbeat reading into perspective. First, figures like these are almost always revised. For the month of September, for instance, the Commerce Department lowered its estimate of seasonally adjusted sales to 369,000 from 389,000.
And second, the results come amid a much broader recovery in the housing market. Earlier this month, the Department of Housing and Urban Development reported (link opens PDF) that housing starts in October were at their highest level since July of 2008. According to the National Association of Realtors, sales of existing homes rose 2.1% last month over September and 10.9% over the same month last year. In addition, data released yesterday suggests that housing prices are on the rise. And finally, as my colleague Morgan Housel discussed, there's a near consensus among homebuilders that the tide has turned.
Individual company news
Shares of Costco (COST 1.01%) are up nearly 5% today after the membership warehouse retailer announced a $7-per-share special dividend payable to shareholders of record as of Dec. 10, 2012. The decision comes amid similar moves by other companies such as Las Vegas Sands (LVS -0.22%), Drew Industries (LCII 0.54%), and Ethan Allen Interiors (ETD -0.90%), among others.
According to The Wall Street Journal, "Companies are betting that tax rates on dividend are heading upward next year." Dividends are currently taxed at the 15% rate applicable to long-term capital gains. However, this rate is widely expected to increase next year for wealthy individuals -- those making more than $200,000 a year -- when the Bush-era tax policies expire.
Shares of Green Mountain Coffee Roasters (GMCR.DL) are up sharply in intraday trading. After the bell yesterday, the company reported better-than-expected quarterly earnings. For its fiscal fourth quarter, Green Mountain recorded earnings per share of $0.64 on $946.7 million in revenue. Analysts had expected $0.48 per share in earnings on $902.3 million in sales.
The single-cup coffee company has struggled against short-sellers since the end of last year -- namely, David Einhorn of Greenlight Capital. Do last quarter's upbeat results turn the tide? "Not if you fancy yourself an old-fashioned investor rather than a stock trader," says my colleague Alex Dumortier. "It's far from clear that Green Mountain may have established a competitive advantage early on with its single-serve beverage range."
If you've been in a Starbucks (SBUX 0.47%) over the last few months, you'll know exactly what Alex means. The industry behemoth has just started marketing its own version of Green Mountain's single-cup brewing system. The device, known as the Verismo, cuts straight to the heart of Green Mountain's business, which had been protected by patents until recently. Over the last 12 months, shares in the company are down 43%.
