Homebuilder stocks were among the worst market performers Thursday after the 10-year Treasury yield popped above 2.9% and NVR (NVR) reported yet another revenue miss.
XBuilder and mortgage company NVR actually closed 0.6% higher after initially tumbling 4.3%, on the stock market today . after missing on sales for the fifth straight quarter. The 10-year Treasury yield rose four basis points to 2.91%, off its intraday peak, after climbing four ticks on Wednesday.
Homebuilder stocks were the top market group in 2017, nearly doubling in value. But they've been laggards in 2018.
Group leader and IBD 50 stock LGI Homes (LGIH) fell 3.7%, undercutting a buy point once again. D.R. Horton (DHI) crumbled 4%, back below its 50-day and testing its 200-day line. Lennar (LEN) retreated 3.5% to its worst level since early November. Meanwhile KB Home (KBH) sank 7.6%, knifing through its 200-day. PulteGroup (PHM) plunged 4%, moving through its 50-day and 200-day lines. M.D.C. Holdings (MDC) slid 3.1%.
The triple-leveraged ETF Direxion Daily Homebuilders & Suppliers (NAIL) tumbled 8.8%, while the SPDR S&P Homebuilders (XHB) ETF lost 2.5%.
Homebuilders Down On Rising Treasury Yield
While NVR's earnings may have played a role with homebuilders' sell-off Thursday, Wedbush Securities analyst Jay McCanless believes rising Treasury yields are the main culprit.
"Historically, the 10-year U.S. yield has influenced the direction of 30-year mortgage rates," McCanless said. "If the 10-year's moving higher, some people are worried that could push mortgage rates higher and reduce housing affordability."
The big drop in the group comes after stocks tumbled when NVR reported weak Q4 earnings in January. The Building-Residential/Commercial group now sits in 181st place among the 197 industries that IBD tracks, after topping the list in 2017.
NVR Earnings Top
NVR beat on earnings, which rocketed 57% to $39.34 a share. Analysts had been looking for $31.44. A sharply lower effective tax rate, 13.1% vs. 22.1% a year earlier, boosted the EPS figure.
Revenue rose 19% to $1.49 billion, but Wall Street had expected $1.515 billion. New orders increased 17% to 5,174 units, but the average sales price fell 4% to $378,200. This was attributed to a shift to lower-priced markets and homes.
Mortgage closed loan production came in at $1.009 billion, an increase of 20%. Income before tax from mortgage banking jumped 50% to $22.4 million.
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