Home Depot (
) boosted homebuilder and retail
Tuesday after the do-it-yourself home-improvement king raised its
2012 outlook, thanks to a recovery in the U.S. housing
The world's largest home-improvement chain's shares gapped up
4.1% to a 12-year high of 63.66. It's trading near a 63.30 buy
point in a bullish, five-week-long flat base. The Atlanta,
Ga.-based firm said it expects 2012 earnings to grow 18% year
over year to $2.92 a share with 5.2% sales growth. The company
said it's improved distribution, cut costs and closed seven
stores in China.
Janney Capital Markets raised its price target while rating it
neutral, noting that rebuilding in Superstorm Sandy's wake will
boost sales over the next few quarters. Home Depot's new outlook
doesn't even factor in Sandy.
S&P Capital IQ, on the other hand, recommended investors
sell Home Depot shares citing high valuations.
"We think the impact of Hurricane Sandy will be modestly
beneficial to Home Depot over the next few quarters," S&P
analyst Michael Souers wrote. "We see numerous macro challenges
ahead, and think the shares are overvalued, trading at about 19
times our fiscal year 2014 earnings per share forecast, a
significant premium to historical averages and the S&P
As a top holding inSPDR S&P Retail (
) andMarket Vectors Retail ETF (
), Home Depot helped lift them. XRT, up 0.59%, rebounded off
support at its 200-day moving average, which is very bullish.
RTH, up 0.71%, surged off its 150-day moving average as it forms
a new base.
IShares Dow Jones U.S.
Home Construction (
), with a 4.6% weighting in Home Depot, gained 0.20%. ITB found
support at its rising 50-day moving average, which is very
bullish. It sports a stellar 95 IBD Relative Strength Rating and
D Accumulation-Distribution Rating on a scale of A to E, with A
being highest. That means its outpacing 95% of the market, but
institutions are selling more shares than buying.
These ETFs defied the market's overall weakness, which left
SPDR S&P 500
) down 0.04% to 138.37. It appears to be finding support at its
200-day moving average.
Homeowner Vacancy At Seven-Year Low
The homeowner vacancy rate, or HVR, fell to a seven-year low
of 1.9% at the end of the third quarter, suggesting the economy
has worked off most of the excess construction built up during
the housing boom years, IHS Global Insight reported Tuesday. It
measures the proportion of homes vacant and for sale and is used
for tracking excess supply. It's averaged 1.65% in the 20 years
ending in 2004. Readings of less than 1.65% indicate tight
markets. It climbed to nearly 3% in 2008 and has been falling
"The HVR is telling us that markets are more in balance than
they have been in several years, which might partially explain
why home prices are rising in so many places," IHS wrote in a
note. "It also might explain why builder confidence is picking up
and why builders are ramping up starts. It is one more reason to
believe that housing will be one of the economy's
better-performing sectors over the next three years."