The stock market is sending mixed messages about the housing market. In a recent FindLeadingStocks report I published, I labeled it the great housing riddle. On one hand, housing stocks are up big in the past six months which bodes well for the housing market. Meanwhile, on the other hand, home improvement stocks are falling and lowering guidance. That leaves a lot of investors looking for answers.
On Tuesday, Home Depot gapped down 2% after the company reported earnings. The home improvement giant warned that annual revenue will fall for first time since 2009. Last week, Floor & Decor fell after reporting earnings. Meanwhile, a slew of housing stocks are up big in 2023 and some housing stocks are trading at new all-time highs!
That disconnect is creating a lot of questions for investors on Wall Street:
What will happen to the economy in the second half of 2023?
Is the consumer in trouble?
Will we fall into a recession?
If so, how deep will the recession be?
So on and so fourth.
Typically, housing stocks and home improvement stocks move in tandem. They tend to be highly correlated and they tend to serve as a good proxy for the overall health of the consumer.
We still have a lot of other big retail stocks that are slated to release earnings later this week. We will know more by the end of the week, but if other large retailers echo Home Depot’s concerns, that could be enough to spark another leg down on Wall Street.
On the other hand, if the market absorbs this news and does not fall. That will be a very bullish sign and suggest that another leg higher may unfold. Stay tuned, it is never a dull moment on Wall Street.
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