Can the Dow Still Start a New Streak?
Mar 19th 2013 12:14PM
Updated Mar 19th 2013 12:16PM
Uncertainty surrounding the Cypriot bailout took its toll on the Dow Jones Industrial Average , ending the index's winning streak at the 10-day mark. But with new housing-market stats increasing confidence in the rebounding market, the Dow may be ready to start a new streak. Since the job and housing markets have been two of the major drivers of investors returning to the stock market, continued good news from both may propel the Dow to great heights.
This morning the blue-chip index jumped on news that America's homebuilders started more new construction in February, with starts increasing 0.8% over January's figures, surpassing the Department of Commerce's expectations. Permits were up 4.6% in February, the highest level seen since mid-2008. As a proxy for future construction, the rising number of permits is a great signal that the housing rebound is continuing to gain momentum.
However, the enthusiasm wore off shortly before noon, and as of 12:05 p.m. EDT the Dow is down 0.2%.
Bank of America recently predicted that house prices will increase by 8% this year, spurring on improvements in both the housing and financial markets. If house prices improve from their current rates, there will be more activity on the markets, leading to bigger gains -- and because the American economy is so dependent on the housing market, that is a great sign of our continuing rebound.
The bank is also enjoying some press time this morning as lauded analyst Meredith Whitney continues to sing its praises, pushing the bank 0.7% higher. Bank investors can expect to see a lot of movement today and tomorrow as the FOMC's recent meeting results weave their way through Wall Street. Because the FOMC determines interest rate policy, the banks will be acutely sensitive to any decision that indicates a change in the current policy.
Outside the Dow, homebuilders Hovnanian and Pulte are both up, gaining 3% and 0.5%, respectively. The companies have been optimistic about the continued rebound of the housing market, but they maintain a strict sense of caution when predicting how the growth will continue. But with the increase in construction and permits, it's clear that homebuilders will be busy for quite a while, leaving both prospective homebuyers and investors happy.
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The article Can the Dow Still Start a New Streak? originally appeared on Fool.com.Fool contributor Jessica Alling has no position in any stocks mentioned. The Motley Fool recommends Home Depot. The Motley Fool owns shares of Bank of America. 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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