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What We're Reading: The Good Friday edition
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Investments

Negative builder news drags on HW 30 for second day

Builders take brunt of bad January construction reports

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Stocks were mixed Wednesday at mid-morning with several construction and home builders suffering after a down report from the National Association of Home Builders and weak construction numbers for January.

Construction on new U.S. homes took an astonishing nosedive in January, dropping 16% to a seasonally adjusted annual rate of 880,000, according to the U.S. Census Bureau report released Wednesday.

On Tuesday it was reported that the National Association of Home Builders housing market index took a nose dive in February, missing expectations by a mile and falling sharply, down a record 10 points to a much-weaker-than-expected 46 which is the lowest reading since May last year.

At mid-morning Wednesday, the Dow was up 0.51% to 16,213, while the S&P500 was up 0.26% to 1,845. The Nasdaq lost 0.13% at 4,267.

The HW 30 – the index of leading stocks that drive the housing market – was down 0.22% at 1,091.

D.R. Horton (DHI) was up 0.13% to $23.34. Toll Brothers (TOL) was down 0.53% to $37.36.

Sterne Agee analysts said they are not worried about the decline for D.R. Horton or weakness in the home builder market.

“We believe the following quotes from the NAHB's Chief Economist David Crowe explain the weakness and highlight some key differences between DHI and other public builders versus most private builders,” the firm said in a note to clients. "’The drop is a result of several forces falling at once...Unusual weather across much of the US reduced consumers’ shopping and buying...Weather effects also depressed retail and auto sales, which in turn depressed consumers’ desire to shop or purchase homes if their livelihood depended on those sectors...Finally, shortages of labor and lots have also begun to have a real effect on builders’ ability to build and sell homes.’"

Sterne Agee continues to rate DHI as a buy because it has homes available for purchase – approximately 9,300 speculative homes (also known as homes started without a contract) at 12/31/13.

Wells Fargo (WFC) was up 0.13% to $46.19 Wedneday at 10:45 a.m. ET. Sterne Agee was also positive on Wells Fargo because its movement back to lower credit mortgages is seen as a good sign.

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