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Dow Drops Despite Housing's Surprising Jump

By Dan Carroll – Feb 26, 2014 at 2:31PM

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Home Depot hits a bounce behind stronger than projected housing data, while rival Lowe's closes the gap after a great earnings report.

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.

The market has been having having a good week so far, but the major indices have fallen into negative territory in midafternoon trading. The Dow Jones Industrial Average (^DJI 2.18%) has is down 21 points as of 2:30 p.m. EST, though a fair number of its 30 blue-chip member stocks are still in the green. Strong housing data kicked things off this morning and has propelled shares of Home Depot (HD 3.16%), higher, adding to the stock's gains after its latest earnings report, while JPMorgan Chase (JPM 1.19%) has sunk to near the bottom of the Dow despite announcing a new round of cost-cutting. Let's check in on what you need to know.

Housing firms up the foundation
The housing market has boomed over the past year, but it hit another strong mark today after the government reported that single-family home sales jumped 9.6% in January. The gains outpaced economist average projections and marked the fastest monthly growth in five years, a great result that managed to overcome the bad weather that plagued the nation this winter. While housing prices have continued to rise, dampening some of the optimism around the sector's future prospects, supply has also fallen. Look for supply to open back up if housing demand continues to surge.

That's nothing but good news for Home Depot, whose shares have surged nearly 1% today. The company has already built up a strong week for investors despite reporting yesterday that sales fell in its most recent quarter, a casualty of bad weather and one less week for the quarter compared to last year's same quarter. One thing Home Depot has managed to excel at, however, is dominating the competition: The company has held onto its No. 1 spot in the home retail market with a vise-like grip as of late.

But competition won't give up easily. Today, top Home Depot competitor Lowe's (LOW 2.45%) delivered strong earnings of its own. Lowe's sales climbed 5.6% for the quarter, outpacing Home Depot and narrowing the gap between these two fierce rivals while swatting aside concerns over how the weather would affect the company's performance. While Lowe's remains the No. 2 player in this game, the company is gearing up for a strong 2014 in which it projects 5% sales growth. Lowe's stock has jumped 5.3% today, and if the housing market continues to gain steam -- and if Home Depot's forecast of a strong spring season holds true -- look for a great showing from these two close competitors in the coming months.

Meanwhile, JPMorgan's stock has fallen about 0.8% to tumble to the bottom of the Dow today. That comes despite JPMorgan announcing it will slash 8,000 jobs. The bank is slimming down its consumer and community banking operations, as the mortgage business has hurt the financial sector's growth as of late, and JPMorgan forecasts likely increasing interest rates in the future only further scaling back mortgage demand.

However, the company is optimistic about its coming few years. JPMorgan noted that it could see up to $27 billion in net profit in the near future after dealing with pricey legal woes in the recent past and with expectations for better performance from its investment and loans businesses.

Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Home Depot. The Motley Fool owns shares of JPMorgan Chase. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$34,589.77 (2.18%) $737.24
JPMorgan Chase & Stock Quote
JPMorgan Chase &
JPM
$138.18 (1.19%) $1.62
Home Depot Stock Quote
Home Depot
HD
$323.99 (3.16%) $9.93
Lowe's Companies Stock Quote
Lowe's Companies
LOW
$212.55 (2.45%) $5.08

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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