US data boost homebuilding stocks

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Homebuilders led a strong rally in US stocks as the S&P 500 enjoyed its best day so far in December.

PulteGroup rose 10.4 per cent to $6.17, DR Horton was gaining 5.7 per cent to $12.43 and Lennar climbed 6.3 per cent to $19.68, as construction starts hit their highest level in a year in November.

Home improvement retailers were boosted, with Masco rising 8.9 per cent to $9.82 and Home Depot adding 4.3 per cent to $41.93.

Some analysts were cautious, however, noting that much of the rise was due to building works starting on apartment blocks, which hit a three-year high.

“The report doesn’t signal any turn in fortunes for the lion’s share of the market – single family homes,” said Andrew Wilkinson, chief economic strategist at Miller Tabak. “Activity there rose by just 10,000 units to a 447,000 annualised pace and the highest in only five months.”

Other analysts warned that Tuesday’s gains could be reversed by a change in sentiment, noting the high volatility of homebuilder stocks. All three large US homebuilders had fallen on Monday, in spite of a confidence survey rising to its highest level of the year.

Broader markets bounced with the S&P 500 adding 3 per cent to 1,241.30 after its best day of the month. However, the benchmark US index remains in negative territory for December, traditionally one of its strongest months.

The financial sector of the S&P 500 recovered ground after Monday’s sell-off. Bank of America climbed back above $5, a level that it had breached on Monday for the first time since 2009. BofA shares closed up 3.7 per cent to $5.17.

Morgan Stanley climbed 4.5 per cent to $14.80 and Citigroup was up 4.6 per cent at $25.95.

Jefferies surged 22.9 per cent to $14.50, its highest close since October, as the investment bank revealed quarterly earnings that were not as bad as expected.

Profit fell to $63m, 23 per cent lower than last year, but many analysts had expected worse. The bank faced intense scrutiny of its exposure to eurozone sovereign bonds in November, but fees from investment advisory services rose year on year.

“The results are better than expected but the share price reaction is overdone,” said Douglas Sipkin at Ticonderoga Securities.

The Dow Jones Industrial Average climbed 2.9 per cent to 12,103.43 and the Nasdaq Composite was up 3.2 per cent to 2,603.73.

AT&T lagged behind the market, but was still up 1.3 per cent to $29.01, despite calling time on its attempt to acquire T Mobile USA.

That was a fillip for its equipment suppliers. Juniper Networks climbed 8.9 per cent to $19.74 and F5 Networks was up 6.7 per cent to $109.39.

“We believe this development is a short-term positive for equipment vendors,” said George Notter at Jefferies. “We believe that AT&T in recent months had significantly dialled back fourth-quarter spending in order to apply leverage in its fight with regulators.”

Rival network Sprint Nextel also took cheer, closing up 9.3 per cent to $2.36.

BlackBerry handset manufacturer Research In Motion suffered another day of heavy selling.

Shares fell 2.9 per cent to $12.52, the latest losses apparently triggered by reports that as many as 5,000 of its PlayBook tablets had been stolen from a freight truck.

CVS Caremark rose 8.9 per cent to $39.80. The pharmacy chain boosted its quarterly dividend to 16.25 cents a share from 12.5 cents a share.

Eastman Chemical jumped 8.1 per cent to $38.70 after announcing it had broken ground on a new facility to produce acetate in China.

Red Hat fell 8.9 per cent to $41.95 for the worst performance in the S&P 500. The open-source software company reported fiscal third-quarter billings that missed analysts’ estimates.

Billings, a predictor of revenue, increased 23 per cent from a year earlier in the three months to the end of November.

Cruise ship operator Carnival Corporation was one of the other five S&P 500 stocks to fall. Shares close down 0.2 per cent to $31.93 after Carnival lowered guidance for 2012 earnings.

Zynga, the online social game developer, enjoyed its first day of gains since a $10bn IPO last week.

Its shares were up 2.1 per cent to $9.24, still 76 cents below their debut price.

In after-hours trading Oracle shares tumbled 10 per cent to $26.26, after the software reported quarterly earnings that missed analyst expectations. That knocked the S&P 500 futures by 5 points suggesting the benchmark index may open lower on Wednesday.

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