MARKET COMMENT
April 26, 2007
It’s impressive that you could see even small gains in
equities today following yesterday’s big rally.
But declines still led advances into the close
but not by much on heavy volume.
We posted nearly 50 charts yesterday so today we’re just
going to focus on more significant market movers and news today.
We’ve been discussing the common inverse relationship
between the dollar and gold for many months.
Usually gold “follows” the dollar, but over this week it seems gold
tentativeness reversed the relationship leading the dollar higher.
This is unusual but as mentioned yesterday it
just appeared that so-called “hot money” was looking to move from gold to more
active sectors like stocks.
And tomorrow
we have more market moving economic data that can shake things up.
The other story that continues to interest me was the increasingly
enigmatic homebuilders.
According to a
story today in MarketWatch, Beazer
Homes [BZH] reported a loss and withdrew guidance as CEO Ian McCarthy stated in
a press release: “…so far this spring selling season has yet to see any meaningful
evidence of a sustainable recovery in the housing market, and we expect current
conditions will continue to put pressure on home builder’s operating results.”
Pretty crummy news right?
Wrong!
JPM analyst stated that BZH’s order drop “was much better than his estimate”.
[Oh my! I smell a
buying opportunity.]
Meanwhile lawsuits
against the company’s mortgage origination business continue apace.
The stock rose [gulp] nearly 5%.
Also Pulte Homes [PHM] also reported poor earnings and
cancelled providing any guidance with CEO Richard Dugas
stated: “Demand for new homes continued to be singficantly
lower and cancellation rates are still above industry norms.”
PHM was up 3.3%.
Ryland Group [RYL] said it would
miss estimates and CEO Chad Dreier stated, “The sales environment remains
challenging in most of our markets.
High
inventory levels, aggressive pricing from competitors and cautious buyers resulted
in a lackluster early spring selling season.”
RYL was up over 4%.
Meritage Homes [MTH] took the
cake.
CEO Steven Hilton stated: “We
anticipate that margins will continue to be under pressure due to competition
in 2007, and would expect some modest improvement in demand during 2008, but
are not relying on a rebound in 2007 to achieve our projections.”
The stock was up [double gulp] 13.5%!
The Homebuilder ETF [XHB] powered ahead on this great news
day by nearly by 3.31%.
Tech and big caps are still leading the market higher.
Tonight MSFT reports much better than
expected earnings and revenues and the stock is powering higher [up 4%] in
after hours trading.
That positive
report should spill over to software sector ETFs
tomorrow barring other intervening developments.
In scanning overseas markets that we’re interested in there
wasn’t a lot to report that was different than yesterday.
With yesterday’s record chart posting, we’ll
just leave things at that.
Meaningful to my view was the unique gold/dollar
action.
Was the relative weakness in
gold the “tell” that Bucky would rally from its
oversold state?
Or, are “hot money” gold
investors just looking to move from gold, which hadn’t been doing much, and buying
some tech or other stocks.
They can be
an antsy crowd.
The Treasury has been pumping the markets with temporary
loans from the record tax receipts making the news.
These funds go to the primary dealer network
and then perhaps to trading desks to play with.
So far in April outstanding temporary loans exceed $54 billion.
That’s some trading loot!
As far as the weird world of homebuilders just remember Wall
Street can move in mysterious ways.
Tomorrow wraps up a great week for stocks.
Have a pleasant weekend.
Disclaimer:
Among
other issues, the ETF Digest is long or short positions in:
GLD, PSJ and IGV.