Earnings vs. Housing Tug-of-War This Week

It’s the first big week of earnings, but don’t overlook how important of a week it is for housing too.

Which of the two will move the markets more this week remains to be seen, but as Bob Pisani noted last week, the recent trend has seen weaker macroeconomic picture trumping the better microeconomic (earnings) data.

Here’s a look at the forthcoming tug-of-war this week between earnings and housing.


  • 12 Dow components (40% of index) and 24% of the S&P 500 are reporting

Emphasis on:

  • Techs: Texas Instruments , IBM , Microsoft , Apple , Yahoo!
  • Financials: Goldman Sachs , Morgan Stanley , US Bancorp , Fifth Third , Huntington Bancshares , KeyCorp
  • Industrials: Caterpillar , United Technologies , Illinois Tool Works , Stanley Black & Decker , Union Pacific , UPS


  • Earlier this morning: July reading of the NAHB Index
  • Later this week: June Building Permits, Housing Starts and Existing Home Sales reports

Despite some better-than-expected earnings reports this morning, the housing data started off the week on a poor note. The National Association of Home Builders (NAHB) reported homebuilder sentiment fell more than expected to its lowest level since April 2009. NAHB Chief Economist David Crowe noted, “builders are reporting continuing consumer hesitancy regarding home purchases due to uncertainty in the overall economy and job markets.”

Meanwhile, each of the key June readings released later this week are expected to show further declines from already dismal levels.

Take a look at the multitude of disappointing housing reports over the past 2.5 months, since the Federal homebuyer’s tax credit expired on April 30:

  1. May housing starts & building permits both disappointed, with May housing starts hitting a 5-month low and permits at a 1-year low
  2. New Home Sales in May plunged 33% from April and hit a record low
  3. May Existing Home Sales also disappointed, while inventories still remain frustratingly high
  4. Homebuilders KB Home and Lennar reported significant double-digit plunges in Q2 orders (KB Home’s orders plunge 23% while Lennar’s orders drop 10%)
  5. The Mortgage Bankers Association reported demand for mortgages continues to shrink as mortgage applications for home purchases fall to a 13-year low

The stalling of a housing recovery – which many believe would be a required cornerstone to any prolonged economic recovery – has frustrated investors over the past couple of months. Since the housing tax credit expired at the end of April, not only have housing stocks been hit hard, but the broader markets have also noticeably suffered too. In fact, none of the major sectors (S&P 500 sectors or major sector indices) have posted gains since the end of April.

Indices & Sectors Performance Since April 30

Here is a look at the performance of some of the major indices since April 30:

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