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Traders shocked that home sales didn't slam stocks

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Sales of new single-family homes surprisingly slid to an eight-month low in March, falling 14.5 percent to a seasonally adjusted 384,000, when economists polled by Reuters had expected to see a reading of 450,000. And although the dipped slightly on the 10 a.m. ET report, many traders were confused about why stocks weren't hurt more.

"I am surprised that the market wasn't hurt by that awful home sales number," wrote Jim Iuorio of TJM Institutional Services. "It has to be that the market needs a couple more numbers to erase the positive vibe, or that the Yellen 'put' is still in play. Either way, it is strange."

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The home sales number seems to challenge the idea that all the softness evident in first-quarter data was due to harsh winter weather. Indeed, one noteworthy aspect of the report is that the weakness was evident throughout the country, with month-over-month declines reported in the West, the Midwest, and the South (sales in the Northeast increased slightly).

Noting that the report was "free of weather excuses," Peter Boockvar of the Lindsey Group commented in a note that "the U.S. recovery remains in fits and starts."

Still, not everyone sees it that way. "I am not concerned in the least," Carl Riccadonna, senior U.S. economist at Deutsche Bank, told CNBC.com.

Sticker shock slams new home sales

He maintains the impact of weather is clearly evident in the number.

"Home sales count when you sign the contract, so people had to go out in January and February to actually look for homes. So it's no surprise that weather impacted the March sales figure," Riccadonna said. "We still can't get a clear read on this extremely seasonal sector. Sometimes that starts in March, but I don't think that's the case this year. I'm not going to cast any judgment on the housing sector until we see the April data."

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Still, it remains the case that the number came in well light of expectations (including those of Deutsche Bank). That's why some have formulated a trading-based theory of why the market doesn't appear to be sweating the news.

When asked about the meager market reaction, Cowen & Co. director of equity sales trading David Seaburg said, "I am surprised, but not confused, given how many investors are short this tape. Investors are still short in a big way, so that could be providing some support here."

—By CNBC's Alex Rosenberg

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