Benchmarks closed with marginal gains on Wednesday, despite reports of a rise in new home sales. Homebuilder stocks were among the biggest gainers for the day. Lowe’s and Target’s better-than-expected earnings also somewhat improved sentiment. However, investors waited eagerly for Fed chairwoman’s Janet Yellen’s semiannual testimony speech.
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The Dow Jones Industrial Average (:DJI) went up 0.1% to close Wednesday’s trading session at 16198.41. The Standard & Poor 500 (S&P 500) added a meager 0.04 points to finish at 1845.16. The tech-laden Nasdaq Composite Index rose 0.1% to 4292.06. The fear-gauge CBOE Volatility Index (:VIX) increased 4.9% to settle at 14.35. Total volume on the New York Stock Exchange was 3.7 billion shares. Declining stocks were outnumbered by the advancing stocks on the NYSE; as for 38% stocks that declined, 59% advanced.
Upbeat new single-family home sales report from the U.S. Census Bureau and the Department of Housing and Urban Development helped the benchmarks stay in the green. Sales of new single-family houses increased 9.6% from December’s revised rate of 427000 to seasonally adjusted annual rate of 468000 in January 2014. The rise was larger than expected as the consensus estimate predicted it would improve to 404000. New home sales increased at the fastest pace in more than five years despite the harsh winter weather, fall in home builders’ confidence in February and a decrease in the pace of existing home sales in January.
Following the news, SPDR S&P Homebuilders ETF (XHB) rose 2.7%. The sector outperformed all the other sectors as key stocks such as DR Horton Inc. (NYSE:DHI), Lennar Corp. (NYSE:LEN), Toll Brothers Inc. (NYSE:TOL), KB Home (NYSE:KBH), Beazer Homes USA Inc. (NYSE:BZH) and PulteGroup, Inc. (NYSE:PHM) rallied 2.9%, 3.6%, 1.7%, 3.2%, 5.3% and 2.8%, respectively.
Currently investors are reluctant to make a big move as they are waiting for Federal Reserve Chairwoman Janet Yellen’s speech on monetary policy before the Senate scheduled for tomorrow. Her comments will be carefully gauged, in order to find out how far the harsh winter weather affected economic activity in the country.
Retail stocks also surged as investors received a boost from Target Corp. (NYSE:TGT) and Lowe's Companies Inc. (NYSE:LOW) better-than-expected fourth quarter results. Shares of the third largest US retailer Target climbed 7% to $60.49 after it claimed it has regained customer loyalty which was affected due to a data breach. Even though the company’s adjusted profit fell 21.2% year on year to $1.30 per share it was at the top end of its guidance of $1.20 to $1.30 per share. Quarterly earnings including U.S. and Canadian operations but excluding other one-time items came in at 90 cents a share, beating the Zacks Consensus Estimate of 85 cents.
Home improvement retailer Lowe's Companies also reported better-than-expected profit. For the quarter ended Jan 31 it posted a profit of $306 million or 29 cents per share, up from $288 million or 26 cents per share a year ago. Its net sales witnessed a rise of 5.6% to $11,660 million, beating Zacks Consensus Estimate of $11,645 million.
The Consumer Discret Select Sector SPDR (XLY) gained 0.6%. Stocks from the sector such as Amazon.com Inc. (NASDAQ:AMZN), The Home Depot, Inc. (NYSE:HD), Ford Motor Co. (NYSE:F), priceline.com Incorporated (NASDAQ:PCLN) and Time Warner Inc. (NYSE:TWX) soared 0.4%, 0.9%, 0.7%, 0.3% and 0.4%, respectively.
Six out of the ten S&P 500 sectors ended in green. The Materials Select Sector SPDR (XLB) followed the Homebuilders as it climbed 0.8%. Stocks including E. I. du Pont de Nemours and Company (NYSE:DD), Monsanto Company (NYSE:MON) and The Dow Chemical Company (NYSE:DOW) went up 0.7%, 0.3% and 0.4%, respectively.
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