Stocks Rallied on Housing Data (AAPL, ANR, BAC, CAT, FSLR, HD, JPM, NBR, PHM, RHT, S, STI, XLE)

Published on Tuesday, 20 December 2011 19:00 Written by Christopher Lynn

New York, December 20^th (TradersHuddle.com) – Stocks surged after better than expected German Business Confidence, a drop in Spanish bond yields, and Housing Starts climbing the most since April 2010, sparked short covering that boosted the upside move.

The Dow Jones Industrial Average rallied 337.32 points, or 2.87%. The S&P 500 index jumped 35.95 points, or 2.98%, while the NASDAQ surged 80.59 points, or 3.19%

The market started with solid gains following positive news out of Europe and better than expected housing data. An upside surprise in German IFO figure and solid demand at a Spanish short-term bond auction helped sentiment early on, while a jump in both housing starts and building permits in November was able to help boost futures, with participants cheering the positive data out of housing.

In Europe, equity markets closed higher following the Commerce Department data in housing starts and building permits, which jumped 9.3% to the their highest level in one and a half years and above expectations. A decline in Spanish bond yields following solid demand at an auction helped improved confidence, which was already at an improved level following better than expected German business confidence.

Stocks were able to hold to gains and close near the session highs, with all of the 30 Dow components finishing higher and all of the S&P 500 key sectors ending with sharp gains. Energy, materials, financials, and industrials jumped more than 3%. Consumer staples and utilities underperformed, but still closed with gains of more than 2%.

Energy was the leader, with the Energy Sector SPDR (NYSE:XLE) rallying 4.1% on the back of a jump in crude oil pricing on hopes for higher global demand amid an improved economic picture and as the Dollar weakened on increased risk appetite. Crude oil surged as more than 3%, closing above $97 per barrel. Nabors Industries (NYSE:NBR), the land driller contractor, rallied 8.63% to $17.63, posting the biggest gain in the sector. Nabors has calculated support at $16.04 and resistance at $19.01.

The high beta name, Alpha Natural Resources (NYSE:ANR), the steam and metallurgical coal producer, jumped 6.98% to $19.47, trimming its monthly tumble to 18.9%. Year to date, Alpha Natural has plunged close to 68%. Earlier in the month, Goldman Sachs downgraded the coal sector as a whole.

Financials staged a rebound after data pointed to a recovery in the housing sector and euro zone debt jitters eased. Regional banks had the biggest gains, trading at the top of the sector. SunTrust (NYSE:STI), the super regional banking holding company with operations in the Mid-Atlantic and the Southeast, rallied 6.77% to $16.87, posting one of the biggest gains in the sector. Last week, UBS initiated its coverage on SunTrust with a Buy and a target price of $22, citing its higher-beta nature. The firm believes the upside potential significantly outweighs the downside risk.

JPMorgan (NYSE:JPM) also was able to benefit in the day, with shares jumping 4.9% to $32.21, posting one of the biggest percentage gains in the Dow Jones Industrial Average. Bank of America (NYSE:BAC), the largest U.S. lender with the biggest exposure in the mortgage area, also rebounded after tumbling more than 4% in the prior session and closing below the $5 mark; the level in which some funds have limitations in owning the stock. Bank of America jumped 3.7% to $5.17 after trading as low as $5.04 and as high as $5.22.

Technology also traded higher after falling in 6 consecutive sessions. Apple (NASDAQ:AAPL) provided a boost to the space, as shares rallied 3.6%, breaking above its 50day moving average in the $391 area after the International Trade Commission ruled that some HTC smartphones that use the Google’s Android software infringe an Apple patent. Moreover, the U.S. trade agency banned the importation of the devices from the Taiwanese company into the U.S. The ruling could be a landmark that could help Apple in other cases against other Android bases smartphone makers. Apple is much more interested in halting sales of the products that infringe patents, especially into the U.S. market, rather than reaching a financial settlement. The heart of the disputes in this case were the technology that lets you tap your finger once on the touch screen to call a phone number that is written inside an e-mail or text message, and schedule a calendar appointment. A small but convenient feature for a smartphone, with the ruling actually having the potential to take this functionality out of Android based devices. Separately, according to Oppenheimer Verizon checks, the firm believes the company will sell 4.5 million iPhones in the quarter.

Also in the sector, Sprint Nextel (NYSE:S), the third largest U.S. wireless carrier, jumped more than 9%, following news that AT&T dropped its bid to buy T-Mobile, bowing to U.S. regulators that gave fierce opposition to the deal. Sprint posted one of the biggest gains in the S&P 500.

First Solar (NASDAQ:FSLR) rebounded sharply after posting a new multiyear low of $29.87 in the prior session. Rival Canadian Solar surged more than 33% after the company and TransCanada announced a sales agreement for 86MW Solar PV Project portfolio in Ontario, Canada. Just a week ago, analysts at UBS issued positive notes on the sector, stating that demand in Europe to remain fairly solid: from 21GW in 2011 to a 25GW in 2012.

Consumer discretionary stocks were also positive helping both the Dow and the S&P 500, following the improved housing start figures, which is a positive for the consumer. Homebuilders jumped on the data, with Pulte Group (NYSE:PHM) rallying 10.38% to $6.14, posting the biggest gain in the S&P 500.

Home Depot (NYSE:HD), the largest home improvement retailer, received an outsized bid, with shares jumping 4.35% $41.95. Home Depot posted one of the biggest gains in the blue chip index, despite Collins Stewart initiating its coverage with a Neutral rating.

Elsewhere, Caterpillar (NYSE:CAT), the world’s largest earthmoving equipment maker, jumped 5.13% to $91.73, posting the biggest percentage gain in the blue chip index.

And Red Hat (NYSE:RHT) slumped 8.9% to $41.95 after the company reported inline revenue for its third-quarter, although the company beat the top line estimates. The company reported EPS of 28 cents on revenue of $290 million, compared to analysts’ target of 26 cents on revenue of $289.6 million. Red Hat posted the biggest decline in the broad market index.