Can the Market Shake Off Ugly Housing Data ?

George Brooks  |


Housing Industry reports for January and February released this week are ugly and will provide a major test for the Street’s position on housing stocks. Unless this data is a weather-related aberration, it is NOT good news for the industry or the economy and stock market. (See “This Week’s Focus” below)

The DJIA has recovered a little more than two-thirds its January/February 7% plunge, the broader based S&P 5000 and Nasdaq Comp. have recouped nearly all of  their losses.

If the Street attributes the housing data to be weather related, the impact on these stocks and the overall market will be minimal.

New support is DJIA: 15,930 (S&P 500: 1,814).

THIS WEEK’s FOCUS: Housing Industry

Yesterday, I called attention to the housing industry, noting that a number of key industry reports will be released this week, giving investors a feel for the Street’s confidence in its outlook. The reports are not expected to make good reading, and yesterday’s Housing Market Index for February attested to just that with a record 10-point plunge.

The housing stocks listed below took a hit at the open following the report at 8:30.

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I reasoned that as an investment, the stocks as a group would show strength in face of bad news if they held firm. Often investors will use adversity to buy. Obviously some of the industry’s woes are weather related which is true for manufacturing and retail in areas that have been hammered by winter storms. If the Street looks beyond the impact of winter weather to better conditions, it will be buyers, especially on weakness.

At 7: 45 a.m. today, the MBA Purchase Applications report were released this morning and were down 6% for the Feb. 14 week (minus 17.0% y/y). Housing Starts were reported at 8:30 and were down 16%, but building permits at minus 5,4% were down  less. Existing Home Sales are reported at 10:00 a.m. Friday.      

Weather related? Yes, to some extent, but needs more input.

Tuesday: following housing stocks took an early hit yesterday but stabilized before the close.

Beazer Homes (BZH) $21.26: Trying to turn up after dropping from  a January high of $25.34  Tuesday close: $20.78

PulteCorp ($PHM) $20.02: Holding firm after rebounding from an August low of $14.23  Tuesday close: $19.79

Toll Brothers (TOL) $37.79: Putting in a strong performance after  basing out between April and October in the $30 area. Tuesday close $37.56

KB Homes (KBH) $19.03:Grinding out a recovery after a May peak at $25.14. Tuesday close: 18.95

DR Horton (DHI) $23.62: Recovering from a September – November base at $18 after a drop from its May, 52-week high of $27.45. Tuesday close: $23.31.

On the other hand, if the numbers are bad and the housing stocks tank, it would bode ill for the industry.

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