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HW 30 finishes up despite shutdown concerns

Auction.com economist sounds alarm on shutdown's long-term impact

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The stock market rallied a bit Friday as the government finished its first week in shutdown mode, with all major stock indices up – including the HW 30.

The HW 30, a comprehensive index of housing-related stocks, rose 0.50% on Friday, with most of the HW composite stocks following the Dow Jones and S&P 500 into positive territory.

Still, there were notable exceptions with homebuilder, Toll Brothers (TOL), down 3.15%, along with builder Lennar Corp. (LEN), which fell 2.88% in Friday trading. Builder D.R. Horton (DHI) also fell 2.78%.

While builders generally felt optimistic in 2013, analysts sounded the alarm on home construction firms after the government went into shutdown mode.

An analyst with Sterne Agee warned the longer this goes on, the harder it will be for builders that deal with the Federal Housing Administration in processing loans for FHA-qualified clients. If HUD has to operate with a skeletal crew, the process may eventually slow down, the Sterne Agee report suggested.

Not surprisingly, with the government still in shutdown mode Friday, homebuilder stocks took a dive.

Despite a rocky week on Wall Street, all stock indices – including the S&P 500 and Dow Jones Industrial average – finished up.

The only problem is the market is now peppered with uncertainty: the same type of uncertainty that rattled homebuilders.

Auction.com economist Peter Muoio released a report on the shutdown Friday saying, “the key issue is what impact the shutdown has on uncertainty.”

Over the summer, Muoio predicted the potential impact of a U.S. government shutdown and the debt ceiling fight. He views this process as a potential trigger that "could derail household and business spending."

The big trigger for distress is economic uncertainty, and unfortunately, that trigger has been pulled, Muoio wrote in his new report.

"[T]he daily uncertainty index shows a sharp jump in uncertainty, back to a level we have not seen since the start of the year," he explained. "The longer the shutdown and fight over the budget and debt ceiling drag on, the higher uncertainty is likely to go and the more damage to spending and investing plans.The stage is being set for another potential late year economic stall that could be worse than econometric models are currently projecting."

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