Today's 3 Best Stocks

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Forget calling the doctor. If you've got an ailment just call on housing data to fix the problem!

With another relatively light day of U.S. economic data on the docket, housing data did its best to to pull the broad-based S&P 500 out of a three-day slump. Specifically, the Case-Shiller 20-City Index, which compares home prices in the 20 largest U.S. cities against figures from the year-ago period, showed a remarkable 12.4% increase -- although this was marginally lower than Wall Street economists had predicted. This shows that despite weakening mortgage originations home prices are still increasing in value and indicates that tight inventory controls on the homebuilder front may be paying off.

If there was negative data to note today it would be that U.S. consumer confidence for September fell to 79.7 from 81.8 in August. This would mark its weakest reading in four months and could be spurred by a mixture of uncertainty surrounding the upcoming debt-ceiling debates, the Federal Reserve's comments about the need for ongoing stimulus, or a jobs market that is improving, but primarily because of part-time, not full-time, hiring.

By day's end, the S&P 500 and investors couldn't ignore those concerns despite upbeat housing data, pushing the index lower by 4.42 points (-0.26%) to close at 1,697.42 for its fourth-consecutive loss.

Topping the charts on this modest down day was chip equipment and software provider Applied Materials which popped 9.1% after announcing a $9.3 billion all-stock purchase of Japan's Tokyo Electron. The deal is expected to be earnings accretive after one year and is anticipated to close about midway through 2014. Adding Tokyo Electron is going to reduce costs through synergies and help diversify Applied Materials' product line geographically and vertically, which is what seems to have shareholders so excited today. However, as my Foolish colleague Brian Pacampara wisely notes, there is a strong chance certain countries may have antitrust issues with the merger since Applied Materials and Tokyo Electron are the No. 1 and No. 3 chip equipment makers in the world. So you may not want to count your chickens just yet.

Lennar did its best to spark a rally in the homebuilding sector by gaining 4.3% after reporting its third-quarter earnings results. For the quarter, Lennar delivered adjusted earnings-per-share growth of 35% to $0.54 while new orders rose 14% and, most importantly, its sector-leading homebuilding margin improved 170 basis points year over year to 24.9%. Lennar is probably one of, if not the, strongest name in the homebuilding sector. Although home prices are up, it's still hard to ignore the rapid drop in mortgage originations from higher interest rates. I would still suggest treading cautiously in this sector but would anoint Lennar the title of best in class among homebuilders.

Finally, car retailer CarMax followed Lennar's lead and moved 3.5% higher after reporting better-than-expected second-quarter results. For the quarter, revenue grew a whopping 18% to $3.25 billion as adjusted-EPS jumped 29% to $0.62 from the year-ago period. Both figures handily surpassed Wall Street's forecast for $3.16 billion in sales and EPS of $0.57. CarMax looks as if it'll continue to benefit with the economic recovery taking a slow path upward and consumer confidence on the downtrend once again.

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The article Today's 3 Best Stocks originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool recommends CarMax. 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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