Housing stocks mostly retreated Wednesday on mixed corporate earnings and economic data and concerns about the Federal Reserve's growing internal debate about its easy-money policy.
Luxury builder Toll Bros. (TOL) — which is also dabbling in apartments — says demand for new housing climbed, even as it posted quarterly results short of analyst forecasts. Its shares tumbled 9%. Lennar (LEN) lost 7% and D.R. Horton (DHI) 6%.
Housing starts fell 8.5% in January, said the Commerce Department. New apartment buildings dived. But single-family starts rose 0.8% to a 4-1/2-year high.
Permits for work yet to be done also hit a 4-1/2-year high, signaling strong activity this spring.
"Overall, the numbers suggest that the housing recovery is in place," said Celia Chen, housing economist with Moody's Analytics. "Construction isn't running at a strong pace by any means , but it certainly is recovering.
Housing activity — and stocks — have been buoyed in large part by aggressive Federal Reserve action to keep interest rates low. But policymakers at their Jan. 29-30 meeting seemed wary of quantitative easing, according to newly released minutes.
The stock market's major averages sold off Wednesday , with builders among the hardest hit.
Lumber Liquidators (LL) jumped to a record 65.48 intraday, but settled for a gain of 13 cents to 62.56. The hardwood floor retailer's EPS surged 67% to 50 cents, 8 cents above Wall Street forecasts. Revenue rose 21% to $210.7 million, topping views for $197.8 million. The company also guided 2013 forecasts higher.
Cushy recliner maker La-Z-Boy (LZB) soared 11% after its late-Tuesday earnings beat, in part on that housing market vigor.
Owens Corning's (OC) EPS tumbled 73% to 11 cents — 5 cents short of forecasts. Revenue fell 3% to $1.16 billion, just shy of estimates. The insulation and roofing materials maker was bullish on 2013. But its shares fell 8%.
Toll earned 3 cents a share in its fiscal Q1 vs. a 2-cent loss a year ago. Analysts had expected a 10-cent gain. Revenue climbed 32% to $424.6 million, far shy of the $502.2 million expected.
"Demand has increased," Toll CEO Douglas Yearley said in a statement. New home contracts leapt 49% in its January-ending quarter and 40% in the first three weeks of the current Q2, he said.
He cited pent-up demand and a lack of competition from hard-hit small private builders.