Right now, the S&P 500 (^GSPC 0.02%) is a steamroller that simply cannot be stopped, advancing for the ninth time in the past 10 trading sessions.
Moving the broad-based index today was more optimistic news from the housing market, which more than outweighed investors' fears of a slowing economy. The Case-Shiller Index of the U.S.'s 20-largest cities showed a 5.5% increase in November and put home prices on their most rapid ascent since Nov. 2006. Consumer confidence figures missed the mark with a reading of just 58.6 vs. the consensus of 61. However, with other economic data and most earnings reports rolling in better than expected, some forgiveness is to be expected.
For the day, the S&P 500 finished higher by 7.66 points (0.51%) to close at 1,507.84, its highest close in more than five years.
As is often the case when we receive stellar housing sector data, homebuilders and homebuilding suppliers were a notable standout. Builder D.R. Horton (DHI -1.29%) skyrocketed 11.8% following its first-quarter report and dragged much of the sector higher, including Plum Creek Timber (PCL.DL), which also reported better-than-expected fourth-quarter results.
For D.R. Horton, it was a quarter where everything fell perfectly into place. Lower mortgages and higher rent prices are spurring people to buy new homes, and fewer foreclosures on the market are making it easier for builders to raise new home prices. D.R. Horton reported a 39% increase in orders and a $0.20 quarterly profit, $0.06 better than Wall Street had projected. As the nation's largest homebuilder, Horton's numbers will trickle down to building materials suppliers like Plum Creek Timber, which is a moderately yielding REIT that supplies various wood products to the homebuilding sector. Perhaps the advance in homebuilding stocks isn't over yet?
Refiner Valero Energy (VLO -0.32%) was the biggest gainer within the index, up a whopping 12.8% after it too reported its quarterly results. Valero's fourth-quarter net income of $1 billion, or $1.82 per share, obliterated Wall Street's consensus estimate of $1.18 and marked its best fourth quarter in seven years. Valero relied less on more expensive foreign oil and utilized cheaper domestic oil at refineries in Memphis and the Gulf Coast region to boost its margins. Refiners are definitely lucrative companies to own when oil prices are steadily below $100, but their capital expenditure plans can often cue you in when it's time to take your profits and run. Valero's $2.5 billion capex figure for 2013 is $900 million lower than 2012 and might be a signal that tighter margins are on the horizon.
Finally, troubled retailer J.C. Penney (JCPN.Q) soared 9.3% after it announced the reintroduction of sales into its pricing strategy. Penney's management had been pretty staunch about its resistance to using sales to lure in customers, but appears to have had no choice with persistent double-digit sales declines. Penney's also plans to increase consumers' savings visibility by placing signs on roughly half of the sales racks to show consumers how much they're saving. Somewhere out there a group of cost-conscious consumers is rejoicing. It remains to be seen, though, if the flip-flop on pricing will work or if the damage has already been done.
