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Fresh Closing Highs for S&P, Nasdaq; Lennar Beats in Q2

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Monday, June 17th, 2024

It was a good day in the markets to start the week. This is the official week of summer, and while the tone feels rather wistful and sunny, we still see fresh all-time closing highs on the Nasdaq and S&P 500: +0.95% on the tech-heavy index, to 17,857, and +0.77% on the Big 500, to 5473. Compare this with the still-favorable +0.41% on the Dow, now at 38,778 — still a ways from that mid-May peak just above 40K. The small-cap Russell 2000 was +0.79%, now at 2022.

Mid-level homebuilder Lennar Corp. (LEN - Free Report) posted easy beats over Q2 estimates this afternoon. Earnings of $3.45 per share outpaced the Zacks consensus by a solid quarter, while revenues of $8.77 billion surpassed the $8.57 billion analysts were expecting. The company cited +19% growth in new orders and +15% on deliveries, with the average home price at $426K. This is down -1%, but an improvement over the -8% drop a quarter ago. High mortgage rates continue to provide a steady headwind, though demand remains present. Shares are -1.8% lower in late trading, perhaps on lighter deliveries guidance going forward.

Lennar is not the highest-rated homebuilder in the space. In fact, we currently see four Zacks Rank #1 (Strong Buy) stocks in the sector, all of which have already reported quarterly earnings: MI Homes (MHO - Free Report) , PulteGroup (PHM - Free Report) , Taylor Morrison (TMHC - Free Report) and Tri Pointe Homes (TPH - Free Report) . KB Home (KBH - Free Report) , a homebuilder with an average selling price a bit higher than Lennar, currently carries a Zacks Rank #2 (Buy), and reports quarterly earnings after the closing bell on Tuesday.

Tuesday morning, we see Retail Sales numbers for May. Month over month, we’re expected to tick up 20 basis points (bps) from the flat 0.0% read in April. Year over year, last time around we were at +3.0%, which was a drop of 80 bps from the prior month. We hope to be out of the range of hard-to-predict volatility in these numbers going forward — we ended last year at +5.5% in December and dropped to +0.3% in January. Moderating retail sales would be another sign the economy is cooling.

We don’t expect another big economic news item beyond this until late next week. At that point, we’ll see the comprehensive Personal Consumption Expenditures (PCE), the Fed’s preferred gauge of inflation. Last month we saw year-over-year headline come in at +2.65%, +2.75% on core year over year. That these figures have kept a “2-handle” now seven months in a row is a good sign. The more lower-growth signals we see — particularly without tipping into recession, at the same time — the more the Fed funds rate is going to look overpriced.

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