Before The Bell: Homie Upgrade; Stag Fears
Meritage Homes was upgraded yesterday, but that 70's show is not looking so funny.
Homebuilders had a strong rally yesterday due in part to an upgrade on Meritage Homes (MTH). According to Bloomberg, Analyst David Goldberg at UBS raised his rating to "buy" from "neutral" on the homebuilder, citing the fact the company produced positive cash flows in the second half of 2007 and it may become profitable before its competitors. Goldberg added that the company had less exposure to the two hardest-hit states, California and Florida, and that MTH may be in more positive position given its focus on "move-up buyers." For another view, read Professor Mike Mish Shedlock's column Housing Bottom Nowhere In Sight.
From the Bull Pen: Those bullish on MTH may delay entry until a pullback to its 50 DMA ($13.20). Sell-stops set below.
From the Bear Cave: Bears may play the downside on the overall sector using the Real Estate ETF (IYR); near-term buy-stops above $65.
That 70's Show
The WSJ reports stagflation fears are increasing amid rising prices and a slowing economy. Yesterday the Labor Department reported consumer prices in the U.S. increased 0.4% in January and 4.3% on a year-over-year basis (near a 16-year high). Further, minutes from the FOMC's January meeting showed that the Fed cut its growth projections for 2008 in the range of 1.3% to 2.0%. Although somewhat exaggerated, the picture is similar to the 1970s with surging commodities prices and crude oil at a new nominal high and near the 1980 inflation-adjusted record. In the year of 1970 to 1981, unemployment reached 9% with inflation rising to almost 15%. Read Professor Lance Lewis' recent column Gold Poised For New Highs.
From the Bull Pen: Professor Lewis has mentioned gold as his play given this circumstance. Bulls can play the upside in the gold ETF (GLD); near-term sell-stops below $90
From the Bear Cave: Should a stagflationary environment occur, bears can expect high-beta stocks to fall. Downside plays may include Amazon (AMZN) and Google (GOOG); buy-stops above $80 and $540 respectively.
For more ideas, see Minyanville's Spotlight Stocks.
Quick Check Around the World
Asian trading closed with the Hang Seng +0.14%, Nikkei +2.84%, Sensex +0.66%, Taiwan +2.43% and Shanghai -0.87%.
A quick look across the pond finds the CAC +1.56%, DAX +1.55%, FTSE +1.80%, ATX +1.43%, Swiss Mkt. +2.54% and Stockholm +1.62%.
A Look At Commodities
Commodities are mostly higher. Crude oil is lower -0.30 to 99.42. Gold is up +11 to 945.70. Silver is higher +0.210 to 17.970, and copper is up +1.60 to 372.15.
The dollar index is lower -0.136 to 75.980.
As of 8:45 AM EST, S&P futures are up +4.90 to 1364, and Nasdaq futures are higher by 17 points to 1807.
On the Radar
Initial Jobless Claims: 349 k inline. Prior revised to 358 k from 348 k.
Continuing Claims: 2784 k vs. 2760 k cons.
10:00 Philadelphia Fed: -10.0 cons
10:00 Leading Indicators: -0.1% cons
Click here for Minyanville's full trading radar.
Have a happy Thursday! Good luck, Minyans!
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