U.S. home-builder shares soar on rate cuts, stimulus
NEW YORK (Reuters) - Shares of U.S. home builders soared for a second consecutive day on Wednesday, as Federal Reserve rate cuts and a possible government economic stimulus plan led to hope that home buyers will return.
Analysts also said cited short selling for the increases.
The Dow Jones U.S. Home Construction Index .DJUSHB, a yardstick measuring home-builder share performance, gained 9 percent at 326.80, its highest level this year.
On Tuesday, the index rose 6 percent after the Fed cut the benchmark federal funds target rate by 75 basis points.
Shares of Beazer Homes USA Inc (BZH.N) spiked 16 percent, or 92 cents, to $6.62 on the New York Stock Exchange. Beazer reported its quarterly order cancellation rate improved significantly to 46 percent from 68 percent in the prior quarter.
Meritage Homes Corp (MTH.N) advanced 16.7 percent, or $1.44 to $10.04 on the NYSE. Standard Pacific Corp (SPF.N) rose 14 percent, or 30 cents to $2.47, also on the NYSE.
"I think it's short covering plus probably some people think the Fed (action) will help consumers," said Alex Barron, senior research analyst for Agency Trading Group.
Short sellers bet against a stock's price rise by selling borrowed shares in hopes of repaying them with cheaper shares.
The U.S. Congress is weighing an economic stimulus plan that could cost around $150 billion and pump money back into consumers' pockets.
(Reporting by Ilaina Jonas; Editing by Jeffrey Benkoe)
