Stocks are up for the second day in a row after a handful of economic reports out today show that the economy continues to improve despite concerns about the fiscal cliff. With a little over an hour left in the trading session, the Dow Jones Industrial Average (^DJI 1.07%) is higher by 50 points, or 0.39%.
Housing, GDP, and employment figures all positive
The best news concerns the housing sector. Data released this morning by the National Association of Realtors showed that a growing number of Americans signed contracts to buy houses in October. The Association's index of pending home sales rose 5.2% last month sequentially and 13.2% over the same month last year. According to Bloomberg, the median forecast among economists was for a 1% sequential gain.
While a government report (link opens PDF) issued earlier this week estimated that sales of new single-family homes dropped in October, there's nevertheless a growing chorus of evidence suggesting that housing has finally turned the corner.
Among other things, as I've discussed previously, data from the Department of Housing and Urban Development estimated that housing starts last month were at their highest level since July of 2008. In addition, an index of housing prices updated earlier this week shows that home prices are on the rise. And, as my colleague Morgan Housel adroitly observed, virtually every major homebuilder has testified to the fact that housing is on the mend. Take this quote he cited from the CEO of Hovnanian (HOV 1.10%), one of the nation's largest homebuilders:
We are undoubtedly well on the recovery route. It's not a question of are we beginning it. I'd say it began at the beginning of this year and that's not just for Hovnanian, that's for the entire industry ... That means we're all going to start building, which means we're going to be hiring, and that will boost employment and help strengthen the economy overall.
Beyond the upbeat developments in housing, there was also good news for the economy overall. This morning, the Commerce Department revised its estimate of third-quarter GDP growth up to 2.7% from its previous estimate of 2%.
In addition, data from the Labor Department showed that applications for jobless benefits fell last week by 23,000 to 393,000. According to Bloomberg: "The drop in claims indicates the job market in the mid- Atlantic region, which employs about 14 percent of U.S. workers, may be stabilizing after Sandy put some area residents out of work at the start of the month."
Finally, the one piece of downbeat economic news out today concerned consumer spending. For the third quarter, household purchases increased by only 1.4%, the smallest gain in more than a year. Economists had predicted that the figure would come in closer to 1.9%. Many analysts believe that uncertainty over the fiscal cliff is leading consumers to curtail purchases until more certainty is introduced into the marketplace.
Individuals winners and losers
In terms of individual company news, shares in a number of retail companies are taking a hit after a series of disappointing earnings releases out this morning. Among others, Kohl's (KSS 1.38%) is down 10.4%, Barnes & Noble (BKS +0.00%) is lower by 10.8%, and Tiffany (TIF +0.00%) is off by 6.4% in intraday trading. Each of these companies disappointed investors with quarterly earnings reports that missed on either the top or bottom lines or both.
Finally, shares of Citigroup (C 3.30%), the nation's third-largest bank by assets, are up slightly after the company said it would lay off an additional 150 workers in its trading division before the end of the year. Many other players in the financial sector have made similar moves as they try to contend with lower fee income and higher regulatory burdens.
