The Dow May Not Be Cashing In on Good Housing News, but These Companies Are
Despite some great news from the housing sector this morning, the Dow Jones Industrial Average is having a hard time keeping its head above water. The index had a slight loss of 56 points as of 11:50 a.m. EDT. Even though the continued improvements within the housing market may not be helping the market this morning because of the weight of other concerns, there are plenty of other stocks that have taken the good news to heart.
The six-point increase in the National Association of Homebuilders sentiment index for the month of July brought the level of confidence for home construction firms back to the highs seen in 2006. The reading of 57 also marks a 16-point rise since April of this year, a very big uptick. Taking into account current sales, traffic, and a six-month outlook for sales, the index reading this morning is just another indicator that the housing market is back on track. And since the overall economy is dependent on a strong housing sector, this bodes well for the country's slow but steady recovery.
Bank of America and JPMorgan have been able to avoid slipping into the red this morning so far, with the housing news likely playing a big role in that. Of course, JPMorgan reported earnings on Friday and noted that new originations of mortgages were down year over year and also over sequential quarters, so the outlook for better current and future sales is the good news the bank needs. Since loans are one of the largest parts of a bank's revenue-generation machine, the recent uptick in interest rates has caused concern that new business would be slowing down and hurt revenue growth.
Bank of America reports earnings tomorrow and has a lot of pressure on it to follow the impressive results of the other big four banks. The housing data is also particularly good for B of A, since the bank is on a mission to grab a bigger slice of the mortgage market. More future sales offer a bigger opportunity for the bank to achieve its goal.
Dow component Travelers is often a Wall Street favorite, but this morning it may be a favorite for anyone who's looking at the housing opportunities on the horizon. As No. 6 of the top 25 home insurers, Travelers has the opportunity to bring in new customers for home insurance as the housing market's positive outlook for future sales materializes.
Speaking of building wealth with home ownership, American Express is loving the rise in confidence from the housing market. As people buy homes and build equity, there are more opportunities to increase consumer spending, which AmEx would be happy to help with. The card company has been bolstered by its high-end products as the higher-income demographichas returned to spending much more quickly than any other segment of the U.S. economy. But with a bigger slice of Americans owning homes and building wealth, the card company would have a greater opportunity to build relationships with new customers.
Good news under the radar
Sometimes the truly good news on any given day can be overshadowed by other concerns. But the continued increases in housing confidence and swing toward more home ownership will benefit a bevvy of companies ready to welcome the new business.
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The article The Dow May Not Be Cashing In on Good Housing News, but These Companies Are originally appeared on Fool.com.Fool contributor Jessica Alling has no position in any stocks mentioned. The Motley Fool recommends American Express, Bank of America, and Berkshire Hathaway. The Motley Fool owns shares of Bank of America, Berkshire Hathaway, and JPMorgan Chase. 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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