ETFs Rise on Strong Homebuilder Numbers

Includes: FXE, XHB, XRT
by: Tom Lydon

An increase in home construction in April, tame inflation, upbeat earnings reports, and a recovering euro are providing a boost to stocks and exchange traded funds in early trading Tuesday.

An April increase in home sales boosted new-home construction, as well. However, since special tax credits expired in April, homebuilders remain cautious in the face of a likely dip in sales. Housing starts gained 5.8% in April, following a 5% gain in March. Overall, the housing starts report shows homebuilders are encouraged by solid growth in home sales, but remain cautious about future growth, as the number of permits for future groundbreakings fell sharply.

  • SPDR S&P Homebuilders (NYSEARCA:XHB)

A day after falling to a four-year low, the euro rose to $1.2427, a modest but important rebound nonetheless, as the European currency has been the driving force behind trading recently. The slight increase in the euro follows a meeting of European Finance ministers and European leaders expecting to hammer out further details in the $1 trillion bailout package.

  • Currency Shares Euro Trust (NYSEARCA:FXE)

Benefits from cost-cutting measures and strong growth overseas turned into better than expected gains for Wal-Mart (NYSE:WMT). First-quarter net income rose 10% to settle at $3.32 billion for the world’s largest retailer. Wal-Mart, which generates $400 billion in sales annually, is considered a key factor in determining consumer spending, so economists closely monitor sales trends at the retailer when determining the health of the U. S. economy.


Disclaimer: Tom Lydon is a board member of Rydex|SGI.

Aaron Hurst contributed to this article.