Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
This morning, the data on new home sales was released, and while many economists expected the rate of sales to fall slightly from June's 497,000 mark, they were still estimating the number to come in around 485,000 for July. But, the actual result has more than shocked a number of market participants today as the U.S. government reported that the seasonally adjusted rate for July was only 394,000. The result was well under the estimates and a 13.4% decline below June's revised figure of 455,000.
Despite the poor economic data, the major indexes are all moving higher today. As of 12:45 p.m. EDT the Dow Jones Industrial Average (DJINDICES:^DJI) is higher by 11 points, or 0.08%, while the S&P 500 is up 0.16% and the NASDAQ is higher by 0.33%. But, although the major indexes are shaking off the poor housing data, a number of stocks throughout the market are tanking because of it.
Shares of both DR Horton (NYSE:DHI) and Lennar (NYSE:LEN) are moving lower as a result of the report. DR is currently down 3.42% while Lennar is off by 2.74%. The housing data reported today will certainly show up in the home builder's quarterly results, but as housing sentiment has increased over the past few months as it looked like we were turning the corner, investors began pouring into these stocks. Since the market is a forward-looking entity, future sales and profit expectations for what a company will post play a large role in determining the share price. Today's report indicates that the homebuilder's sales and profits may not be as good as many investors previously expected, and that's causing the stock to fall.
Home Depot (NYSE:HD) is also losing ground today, likely the result of the housing report. Shares are down 0.7% as it seems the housing market may be cooling off. Most economists consider a monthly housing sales number of 700,000 to be a healthy market. Today's report came in well below that number as rising interest rates have likely kept some possible buyers out of the market, meaning less new home owners which could be spending money at Home Depot. Additionally, rising interest rates will not only keep home sales low, but raise the monthly payments of those individuals who are buying a new home. This lowers the amount of extra cash they have sitting around every month and therefore reducing there disposable income. Along with other retailers, that's another area in which Home Depot may be hurt by rising rates in the long run.