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Markets Drift Lower; KB Home (KBH) Beats on Lower Home Prices
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Market indices took a powder again today, drifting in a summer breeze and tethered to some light reiterations of last week’s Fed message about future interest rate hikes. Valuations had likely gone a bit out to sea regardless, so this holiday-shortened week we’re pulling them back to shore a bit. The Dow dropped -102 points, -0.30%, while the Nasdaq gave back -165 points, -1.21%. The S&P 500 split the difference between the two, -0.52% for the session, while the small-cap Russell 2000 was -0.20%.
As we await more damaging effects of sustained higher interest rates in monthly and weekly economic data, the simple answer on interest rates is: we just don’t know. Not even the Fed does; that’s why they’re being data-dependent. Everybody’s waiting for something to “break” (aside from high-risk tech startup banks), so we’ll be all over it if/when we see it. It should be noted, however, that Fed Chair Powell & Co. have done a good job so far deflating the inflation balloon without dragging us down into deep, certain recession. Many things may change, but right now Powell is Captain Sully.
One of the initial sectors to feel the weight of higher interest rates was the housing market; after a surge in the first months of 2022 to get those new mortgages under wraps, the market fairly dried up. That appears to be changing as of this week, however, with a big jump in new Housing Starts and Building Permits accompanying a more optimistic Homebuilders Index. With mortgage rates apparently settling in here around 7%, pent-up demand is starting to find its way into an expensive market.
Take KB Home (KBH - Free Report) , for instance: the wide-ranging homebuilder reported fiscal Q2 earnings after today’s close, and again showed unexpected levels of strength in the past quarter. Earnings of $1.94 per share easily surpassed the $1.28 analysts were looking for, on revenues of $1.77 billion which outstripped projections for $1.43 billion in the quarter. The company also upped its revenue guidance for the full fiscal year, as deliveries grew +6% in Q2.
That said, the Average Selling Price of a KB Home unit dropped -3% — likely a result of higher mortgage rates working over new home asking prices. The firm specializes in first-time and move-up homes, and its quarterly data looks to support the homebuilding industry’s emerging narrative: demand is fighting through higher mortgage costs. Shares are up +2% in late trading.
Image: Bigstock
Markets Drift Lower; KB Home (KBH) Beats on Lower Home Prices
Market indices took a powder again today, drifting in a summer breeze and tethered to some light reiterations of last week’s Fed message about future interest rate hikes. Valuations had likely gone a bit out to sea regardless, so this holiday-shortened week we’re pulling them back to shore a bit. The Dow dropped -102 points, -0.30%, while the Nasdaq gave back -165 points, -1.21%. The S&P 500 split the difference between the two, -0.52% for the session, while the small-cap Russell 2000 was -0.20%.
As we await more damaging effects of sustained higher interest rates in monthly and weekly economic data, the simple answer on interest rates is: we just don’t know. Not even the Fed does; that’s why they’re being data-dependent. Everybody’s waiting for something to “break” (aside from high-risk tech startup banks), so we’ll be all over it if/when we see it. It should be noted, however, that Fed Chair Powell & Co. have done a good job so far deflating the inflation balloon without dragging us down into deep, certain recession. Many things may change, but right now Powell is Captain Sully.
One of the initial sectors to feel the weight of higher interest rates was the housing market; after a surge in the first months of 2022 to get those new mortgages under wraps, the market fairly dried up. That appears to be changing as of this week, however, with a big jump in new Housing Starts and Building Permits accompanying a more optimistic Homebuilders Index. With mortgage rates apparently settling in here around 7%, pent-up demand is starting to find its way into an expensive market.
Take KB Home (KBH - Free Report) , for instance: the wide-ranging homebuilder reported fiscal Q2 earnings after today’s close, and again showed unexpected levels of strength in the past quarter. Earnings of $1.94 per share easily surpassed the $1.28 analysts were looking for, on revenues of $1.77 billion which outstripped projections for $1.43 billion in the quarter. The company also upped its revenue guidance for the full fiscal year, as deliveries grew +6% in Q2.
That said, the Average Selling Price of a KB Home unit dropped -3% — likely a result of higher mortgage rates working over new home asking prices. The firm specializes in first-time and move-up homes, and its quarterly data looks to support the homebuilding industry’s emerging narrative: demand is fighting through higher mortgage costs. Shares are up +2% in late trading.
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