Summary: Both of yesterday's major economic numbers surprised pundits -- one to the upside and one to the flipside: 1) Orders for durable goods declined 0.5% in August, following a (revised) 2.7% decline in July, the first back-to-back decline in more than 2 years. The report showed demand fell for machinery, computers/electronics, metals, and aircraft; car orders were up. Economists are counting on business investment to counteract the cooling housing market and soft consumer spending. Yesterday's numbers, which were, "far more bearish than expected," have some analysts asking, "soft landing or hard one?" 2) Sales of new homes rose 4.1% in August, an unexpected jump. Still, compared to Aug-05, sales are 17.4% lower. Some builders say conditions actually worsened in August. Lennar Corp. (LEN) CEO Stuart Miller called it, "the weakest month yet." Economists attributed the jump to a easing in mortgage rates and enticing new buyer-incentive programs offered by homebuilders in an attempt to boost sales.
Related links: Full WSJ article • There’s a Housing Slowdown -- And Business Spending's Not Picking Up the Slack • Message From Today's Durable Goods Report: Time To Get Defensive
Potentially impacted stocks and ETFs: Major homebuilder stocks: KB Home (KBH), Beazer Homes USA Inc. (BZH), Centex Corp. (CTX), Toll Brothers Inc. (TOL), Hovnanian Enterprises Inc. (HOV), Pulte Homes Inc. (PHM) • Home sales: H&R Block Inc. (HRB) • Furnishings: Ethan Allen Interior (ETH), The Home Depot Inc. (HD), Sherwin Williams Co. (SHW), Mohawk Industries Inc. (MHK) • ETFs: streetTRACKS SPDR Homebuilders ETF (XHB)
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