Stocks Break Lower With Month's Largest Trading Range

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Updated September 24, 2019

Market Moves

The S&P 500 index closed at its lowest price level since Labor Day as investors showed their concerns over the Fed's ongoing open market operations and President Trump's anti-globalist comments to the United Nations assembly. Even the news, tweeted by President Trump, that he would make publicly available the unredacted transcripts of his conversation with Ukranian officials couldn't turn the markets around, although they did rally for about 20 minutes on the news.

The S&P 500 Index (SPX) closed nearly 1% lower for the day and put in the largest trading range for the whole month of September. The Nasdaq 100 (NDX) and Russell 2000 (RUT) indexes both closed more than 1% lower. The trading was on medium to high volume, underlining the significance of this move and the preference investors are showing for safer havens such as bonds and gold. Indeed, 20-year treasury bonds, as tracked by the iShares 20-year Treasury Bond ETF (TLT), and the SPDR Gold Trust (GLD), both appear to be resuming an upward trend established early this year (see chart below).

Chart showing the performance of gold and bond prices

Homebuilder Stocks Maintain Strong 2019 Performance

Investors showed concerns in the markets today, but such concerns didn't stop them from investing in homebuilder stocks, which nearly closed positive today. The stocks in this industry group have significantly outperformed the markets so far this year. With some stocks in the sector showing strong buying activity and new home demand increasing amid lower mortgage rates, the group has shown itself surprisingly well insulated from recent pressure weighing on the major indexes.

Chart showing the performance of homebuilder stocks and the S&P 500 index

Which Stocks Lead the Homebuilder Industry?

Shares of KB Home (KBH), which recently reported earnings; D.R. Horton, Inc. (DHI), the nation's largest homebuilder; and PulteGroup, Inc. (PHM) appear to be leading the homebuilder industry group. Shares of each of these companies have shown excellent performance so far this year.

The health of this industry group is useful to watch during times of uncertainty when bank performance and monetary policy is concerned. In 2007, this group of stocks performed dreadfully, giving a loud and clear warning about the subprime mortgage crisis that was brewing. Currently, the health of this industry bodes well for calming investor fears about current Federal Reserve actions and the health of the financial sector.

Chart showing the performance of major homebuilder stocks

The Bottom Line

U.S. stock indexes fell sharply lower while bond and gold indexes rose on the day and appear to be resuming their upward trend. The combination of these events seems to portend more downward pressure on stocks for the week. Meanwhile, the results in the homebuilder sector appear to support those who contend that the financial sector is probably not in any long-term trouble.

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