Thursday, July 25, 2013

Homebuilders Surprise To The Downside

The markets are mixed this morning on another heavy day of earnings.  The Nasdaq is outperforming again due to strong earnings reactions from Facebook, Qualcomm, and F5 Networks to name a few.  On the downside, surprising negative reactions to the earnings from homebuilders like DR Horton and Ryland.

Stocks rising on earnings: BIIB, FB, ASGN, CTXS, BIDU, FFIV, V, QCOM, FLS, TRIP, BWA, GNC, CELG

Stocks falling on earnings: DHI, RYL, PHM, MMM, LVS, EQIX, ANGI, TSCO, WDC, ALXN, UAL

In economic news, durable goods spiked +4.2% but it was entirely due to transportation orders (cars, planes, etc).  Ex-transportation durable goods were unchanged. 

Bond yields are rising again today, but its hard to see why its due to any economic data or commentary from the homebuilders.  The 10-year yield is higher to 2.62% and weighing on most yield-sensitive investments (bond funds, REITs, preferreds, etc).

Asian markets were lower overnight.  S. Korea's GDP rose 2.3% in the most recent quarter.  Europe's markets are also lower today.  Eurozone private loans declined -1.6% yr/yr.

The dollar index is a bit lower and commodities are mixed.  Oil prices are weaker near $104.75.  But gold prices are higher to $1330.  Silver and copper prices are firm also.  The gold etf (GLD) continues to battle with its 50-day average for the 4th day.

The volatility index is higher again to 13.42, but still trading in the middle of that 13-15 zone we have discussed recently.

Trading comment: We said in the beginning of the week that the market was overbought and due for a rest.  Moreover, that the most bullish outcome for investors would be some sort of sideways consolidation rather than a sharp selloff.  It looks so far like we are getting the former, with the SPX down about 10 points so far this week.  As we discuss during most earnings seasons, our game plan would be to focus on those stocks that reported solid earnings and had positive reactions and then look to buy them or add to them on pullbacks due to overall market weakness.

KAM Advisors has long positions in FB, FLS, V


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