Interest Rate Cut Lifts Homebuilders

The homebuilding stocks jumped today after the Federal Reserve cut the federal funds rate by half a percentage point to 4.75 percent. Three homebuilders saw double digit gains: Hovnanian Enterprises (HOV), 28.42 percent; Beazer Homes USA (BZH), 18.06 percent and Standard Pacific Corp. (SPF), 15.19 percent.

Other homebuilders with good gains included Brookfield Homes (BHS), 9.32 percent; Toll Brothers (TOL), 8.66 percent; Ryland Group (RYL), 8.49 percent; NVR (NVR), 7.80; Pulte Homes (PHM), 6.28 percent; Meritage Homes Corporation (MTH), 6.63 percent and MDC Holdings (MDC), 5.84 percent.

iShares Dow Jones US Home Construction (ITB), an exchange-traded fund (ETF) that includes the major homebuilders gained 6.88 percent.

Be careful with these stocks because one good day does not make a new prolonged price upside. The slowdown in the housing industry is not over and the homebuilders could face more downside.

Related Articles:

Exchange-Traded Funds
Homebuilding Stocks

Posted September 18, 2007.