Today's 3 Best Stocks

Today's 3 Best Stocks

The wait is over, and it appears that earnings season kicked off on a largely positive note last night, pushing the broad-based S&P 500 higher for the eighth time in the past 10 sessions.

The fire under the market today seems to be caused by aluminum giant Alcoa's second-quarter earnings report, which delivered a 2% decline in revenue to $5.85 billion and an adjusted profit of $0.07 per share, $0.01 better than the Street had forecast. More importantly, despite the challenging environment for aluminum pricing and supply, Alcoa again stuck to its global growth forecasts for 2013. While this is a far cry from the growth we were accustomed to from Alcoa just five years ago, it was nonetheless a solid report that highlighted a mixture of cost-cutting efforts on Alcoa's part, and strengthening auto sales in the U.S. and China.

By day's end, the S&P 500 romped higher by 11.86 points (0.72%) to close at 1,652.32. However, if you think today's gains were impressive, wait until you see the moves by the following three top performers.

With a diverse make-up, it's extremely rare for the top three performers within the S&P 500 to come from the same sector -- but that's exactly what happened today. The nation's largest homebuilder, D.R. Horton , the homebuilder with the highest margins, Lennar , and turnaround candidate PulteGroup logged gains of 7.6%, 5.9%, and 5.5% on the day, far surpassing the other large gainers.

The impetus for the huge rally in the sector relates to foreclosure data from CoreLogic, which showed that the number of completed foreclosures fell 27% to just 52,000 from the year-ago period in June. This figure rose a modest 3.5% from last month. Fewer foreclosures on the market means homeowners are going to turn more and more toward newer homes. With inventory levels remaining low, homebuilders such as D.R. Horton, Lennar, and PulteGroup have pricing power for the first time in more than five years.

The sector isn't without its concerns, though, as the Federal Reserve has made it clear that at some point in what could be the near future it plans to pare back its $85 billion in monthly bond purchases, affably known as QE3. The purchasing of long-term U.S. Treasuries and mortgage-backed securities has gone a long way to keeping lending rates low and attracting homebuying efforts. With 30-year mortgage rates surging last week on better-than-expected jobs data, it's quite possible that mortgage applications could dry up and homebuilders could again struggle.

With the American markets reaching new highs, investors and pundits alike are skeptical about future growth ... but they shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!

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