Why Housing Is Sending the Dow to Triple-Digit Gains


The markets are surging in a big way today, and the Dow Jones Industrial Average is doing its best to wipe away the memory of yesterday's disappointing session. The Dow is up 116 points, or 0.84%, as of 2:25 p.m. EST, with just six of its 30 component stocks in the red. Housing data is fueling today's surge, and home improvement retail giant Home Depot has been quick to capitalize.

Housing on the upswing
Data released by the Commerce Board showed new-home sales growing by more than 15% last month, jumping to their highest annual rate since mid-2008. Prices are on the rise, as well: The Federal Housing Finance Agency reported home prices increasing 0.6% in December. All the good news is helping to convince investors of the turnaround in housing and the economy's sustained rise, pushing the Conference Board's Consumer Confidence Index far above estimates for the month despite the implementation of the payroll tax, which could slow the economy's momentum.

Home Depot's loving it so far: Shares of the company have rocketed upward by 5.3% to lead the Dow today. Improvement in both housing and consumer sentiment is just what Home Depot needs to succeed, and if this trend keeps up, the company's stock could add to the 36%-plus gains of the past year and reach new heights.

Energy stocks are also on the rise, with Chevron and ExxonMobil posting respective gains of 1.3% and 1.4%. The sector took a pounding yesterday, so much of today's momentum is the result of investors capitalizing on the short-term dip. Ukraine is also making news with Chevron, as the Eastern European nation is hoping to ink a shale-gas production-sharing agreement with the company in an effort to cut its energy reliance on Russia.

Big Pharma's Merck isn't having such a good day, however, dropping 0.7% to lead all Dow laggards lower. A study of health insurance records showed that patients hospitalized for pancreatitis -- an inflammation of the pancreas -- were twice as likely as a control group to be on either Merck's diabetes drug Januvia or Bristol-Myers Squibb's Byetta. That's bad news for both companies, which are hoping the sales from the lucrative diabetes market can help form the foundations of future sales growth. Januvia is Merck's best-selling drug, pulling in more than $4 billion in revenue last year; if anything happens to slow the medication's momentum, Merck could be in for tough times.

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Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Chevron and Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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