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Strong Housing Data Helps Push the Major Indices Higher

By Matt Thalman – Feb 26, 2014 at 1:00PM

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Home Depot and Lowe's rise on positive earnings and housing data.

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 major U.S. stock indices are all in the black in early afternoon after the Commerce Department said that sales of new homes rose 9.6% in January to a seasonally adjusted annual rate of 468,000, which is the highest level in five and a half years. This news has many believing that the housing market has finally turned a corner and that more growth will come as we head into spring, which is typically a good time for housing.  

As of 1 p.m. EST, the Dow Jones Industrial Average (^DJI 0.01%) was higher by 51 points, or 0.32%, the S&P 500 was up 0.3%, and the Nasdaq rose 0.6%.

The strong housing data is certainly helping shares of Home Depot (HD -0.33%) move higher today, but that wasn't the only cause for the rise. Top home-retail competitor Lowe's (LOW -0.75%) reported earnings this morning before the opening bell and investors are liking what they are seeing. Fourth-quarter revenue came in at $11.66 billion, while earnings per share hit $0.31. Analysts were looking for sales of $11.68 billion and earnings of $0.31, so those results were roughly a match on both counts. For fiscal 2014, Lowe's believes revenue will increase by 5% with comparable-store sales rising by 4%, which should indicate Home Depot will see at least similar results. Lowe's also announced that it was adding $5 billion to its share buyback program, which is likely one reason the stock was higher by 5.8%.  

Sole Dow beverage stock Coca-Cola (KO 0.36%) was higher by just 0.13%. There was little news related to the company; but with Coke partnering with Green Mountain Coffee Roasters to develop a single-serve cold carbonated beverage machine, investors may be looking at rival SodaStream's (SODA) earnings report and attempting to determine if Coke is heading down the right path.

SodaStream reported fourth-quarter revenue of $168.1 million and earnings of $0.03 per share. Those figures beat the $167.3 million and $0.01 analysts had been looking for. However, when you consider that revenue grew 26% when compared to the same quarter last year but earnings fell from $0.36 per share, the quarter doesn't look that great. The company's margins took a massive hit as SodaStream discounted its machines, hoping that once customers had the unit they would spend more down the road on beverage refill cartridges and CO2 canisters. Time will tell if that plan works out, but for Coke investors this may not be good news. SodaStream has a massive first mover advantage, and trying to get those users to convert will be very difficult. Meanwhile, persuading new customers to enter the market may not be an option as more and more Americans cut sodas out of their diet.

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Matt Thalman owns shares of Coca-Cola and Home Depot. The Motley Fool recommends Coca-Cola, Green Mountain Coffee Roasters, Home Depot, and SodaStream. The Motley Fool owns shares of Coca-Cola and SodaStream. 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)
$33,852.53 (0.01%) $3.07
Coca-Cola Stock Quote
$62.48 (0.36%) $0.22
Home Depot Stock Quote
Home Depot
$315.96 (-0.33%) $-1.04
SodaStream Stock Quote
Lowe's Stock Quote
$207.47 (-0.75%) $-1.57

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

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