Homebuilders When Housing Starts Are Stronger Than Expected

Today's Housing Starts report showed the strongest month-over-month gain in more than two years.  Does this mean investors should buy the homebuilders for a trade?  Not necessarily.  In the table below, we highlight the performance of the Homebuilder ETF (XHB) from the open to close on days when Housing Starts are released.  Since it started trading in 2006, the homebuilder ETF has done better from the open to close on days when Housing Starts were weaker than expected.  When the report is stronger than expected, the average return from open to close is 0.1%, but when Housing Starts come in weaker than expected, XHB averages a gain of 0.8%.

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