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MARKING TIME
By Charles Payne, CEO & Principal Analyst
12/2/2009 1:42:33 PM Eastern Time
For the most part this has been a nondescript session marked by a couple of economic reports that didn’t move the needle, and in fact, only added to the typical anxiety ahead of the jobs report. There is some excitement in technology stocks with semiconductors leading the way higher. This is the kind of supercharged group that could lead the market much higher. In addition, the action in airlines gives credence to the notion of a broader economic recovery. The Semiconductor Index (SOX) is in a perfect uptrend, making a series of higher highs/lows while the AMEX Airline Index (XAL) looks poised to form a double-top and maybe move much higher.
Then there are the Homebuilders…
By: David Urani, Research Analyst
Mortgage applications went up a touch last week, with mortgage rates for a 30-year fixed rate loan hitting 4.79%, down from 4.82% the previous week. Rates are back down near the record lows we saw earlier this spring, aided by loose monetary policy from the Fed and other liquidity measures in the mortgage market. Remember, these efforts are yet another one of the many “bailouts” being exercised on the housing market these days in addition to tax credits and foreclosure prevention programs. Both refinance and purchase applications were up week to week, and activity in general is roughly on par with that of 2007, although the balance has shifted more towards refinances while purchases are still at low levels.
There were also a couple of analyst upgrades in the housing sector today for KB Home (KBH) and MDC (MDC). One of the upgrades cited the recent changes the government has made to the tax code to allow carry-backs of losses to five years, up from three years previously. As a result, most homebuilders should receive a tax credit of hundreds of millions of dollars that they can add to their cash balances. We also suspect that the upgrades have something to do with valuation. The last three months have been very tough on homebuilding stocks, with a myriad of concerns hitting the sector; the Dow Jones Home Construction Index is off 12.0% while the Dow Jones Industrial Average is up 12.0%. Now could be a chance for some of the homebuilders to have their valuations reset, now that the tax credit extension is in place, mortgage rates remain low, and the administration is turning up the heat on its mortgage foreclosure plan.
Rest of the Day
I’d be surprised if the rally on the Dow continues into the close, but I wouldn’t fall out of my chair. All things being considered, I actually like the action in the market today.
By the way, don’t forget to vote on the poll as to who has lost the most credibility. Right now Doug Elmendorf and the CBO are running away with it. I’ll post results tomorrow morning. Let me know what you think at charles.payne@wstreet.com. |
  
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