HP Leads the Dow in a Shaky Trading Session
The Dow Jones Industrial Average is down slightly following worse-than-expected homebuilder confidence and worries that the Cyprus bank deposit tax will cause unrest in Europe. As of 1:15 p.m. EDT the Dow is down 15 points, or 0.1%, to 14,599. The S&P 500 is down % to 1,556.
There was just one U.S. economic release today.
NAHB Housing Market Index
The National Association of Home Builders reported that its housing-market index fell by two points to 44 in March, falling short of analyst expectations of a rise to 47. The housing market improved throughout 2012 but leveled off at the end of the year, with the housing-market index hitting a five-year high of 47 in December. A level below 50 indicates that more builders see conditions as negative, rather than positive. It's important to note that 46 is still far above the HMI's March 2012 level of 28 and up more than fivefold from the low of eight hit in January 2009. Hopefully, this is not the start of a downward trend for the year.
NAHB Chief Economist David Crowe had this to say about the drop:
"In addition to tight credit and below-price appraisals, home building is beginning to suffer growth pains as the infrastructure that supports it tries to reestablish itself. During the Great Recession, the industry lost home building firms, building material production capacity, workers who retreated to other sectors and the pipeline of developed lots. The road to a housing recovery will be a bumpy one until these issues are addressed, but in the meantime, builders are much more optimistic today than they were at this time last year."
While the housing market weighs on the U.S., the big reason stocks are down today was news over the weekend of the Cyprus bailout and bank account tax. To bailout the country's bankrupt banks, in addition to a cash infusion from Europe, the country is instituting a tax of between 6.75% and 9.9% on the cash in people's bank accounts, to be taken tomorrow. After the tax was announced, Cypriots immediately rushed to ATMs, which quickly ran out of cash; bank accounts have since been frozen. Investors are worried that the bank levy could cause runs on weaker banks across Europe. If you want to know more, Fool banking analyst Morgan Housel took a long look at the situation in Cyprus and what it means for investors.
Today's Dow leaders
Today's Dow leader is Hewlett-Packard , up 2.7%. Earlier today HP announced in a press release a new analytics and information-management service to help clients gain value from big data. Big data has been a hot topic the past few years as cheap computing power and memory allow companies to collect more data than ever before. The easy part is collecting the data; the hard part is doing something useful with it. The "HP Big Data Discovery Experience" aims to enable clients to unlock the value of their data and should provide a growth opportunity for HP going forward.
Furthermore, a Morgan Stanley analyst upgraded Hewlett-Packard from hold to buy, citing the company's renewed focus on free cash flow. CEO Meg Whitman is trying to turn around Hewlett-Packard and return value to shareholders. The analyst believes the focus on free cash flow will free up cash to return to investors more quickly than previously anticipated. Hewlett-Packard currently yields 2.4% and is a member of the 2013 Dogs of the Dow. Increased dividends would be welcomed by shareholders.
Second for the day is Verizon , up 1.5%. Citigroup analyst Michael Rollins upgraded Verizon from hold to buy on renewed speculation that Verizon will buy out Vodafone's 45% stake in Verizon Wireless. Verizon Wireless is a strong business, and Vodafone's stake won't go cheaply. Dividends from Verizon Wireless currently make up the majority of Verizon's earnings and give Vodafone shares a hefty special dividend each year. Verizon will have to take on a significant amount of debt to pull off such a buyout, and if that happens, investors should be wary. In the meantime, Verizon sports a 4.3% yield and is also a member of the 2013 Dogs of the Dow.
Third for the day is Home Depot , up 1%. Last week's retail sales numbers showed rising consumer spending on home improvement. Given the negative homebuilder confidence numbers, it's a bit of a surprise that Home Depot is up, but with the overall level of homebuilding and home improvement activity higher than last year, Home Depot is set to do well.
The article HP Leads the Dow in a Shaky Trading Session originally appeared on Fool.com.Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. He has no position in any stocks mentioned. The Motley Fool recommends 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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