Market Moves Higher. For Some Reason.
Kyle is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I love the headlines you see on most of these articles. It’s probably the main reason my titles don’t make any sense. “Stocks edge higher on hopes for IMF cash boost”. “U.S. stocks rise on Goldman Sachs results”. “Inefficient economies seen as drag on Europe”. As if any single one of these has anything to do with how the entire market happens to react on any given day.
There is one title that actually caught my eye, even though the exact same words have been used several times over. So odds are you have read “Stocks Advance after Strong Housing Report”, but it’s not the same 72 articles each time you see that title. And it’s probably been a long time since you saw that one.
By the way, my own personal favorite is, “(Insert Number) must own stocks for (Insert Year)”.
But let’s get back to the common housing report title, which is of actual interest to me. I understand if the title doesn’t scream “READ ME” to you, and I often have a difficult time sifting through the muddled masses of information, myself (I realize in that statement I am a “pot” calling out all “kettles”). The reason it is of personal interest to me (as it should be to you), is the infinite number of times I am force-fed quotes like, “…as housing goes, so goes the economy”. It is also of interest to me because I have a well-documented, love-hate relationship with USG Corporation (NYSE: USG). As the stock flirts with $14 levels (I’m sure the report is the sole reason for this), it’s interesting to also take a peek at the moves made by Lowe’s (NYSE: LOW), and Home Depot (NYSE: HD). With the homebuilder sentiment move, these names should continue the positive momentum.
The four-point increase documented in U.S. homebuilder sentiment can only help these moves for the aforementioned companies, and similar ones. I think it’s also a great example of taking opinions with a grain of salt, as economists polled by Reuters predicted sentiment to remain the same (the index moved from 21 to 25, the highest since June, 2007). Another great call.
I’m curious to know if these were the same spectacular calls crying about a double-dip recession at various times in 2011. And similar to recessions, it’s rather unwise to stick your neck out there and make a call on a bottom in housing. I certainly don’t have the experience, the diplomas on the wall, or the chops to make that call from on high. We simply don’t know for certain until we come out of these situations. Much like a lot of people don’t know they were in a car wreck until they wake up in the hospital and begin the long road to recovery.
So as housing takes positive steps toward recovery and continues to make baby steps from a hopeful “bottom”, keep an eye on the homebuilding sector, as well as the healthy climbs that Lowe’s and Home Depot have made. I own no position in either, but they both reward their shareholder’s with dividends (2.1% and 2.7% yields, respectively), and may warrant a look as each reports earnings next month (Lowe’s on the 27th, Home Depot on the 12th).
Until next time, from the trading table,
Kyle Metivier
The Motley Fool has no positions in the stocks mentioned above. kmet312 owns shares of USG. Try any of our Foolish newsletter services free for 30 days. 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.
