UPDATE 2-Sentiment index sends US homebuilder shares higher

* Homebuilders index up 6 pct vs 1.25 pct gain in S&P 500

* Lennar Corp up 11.7 pct at $8.69 (Adds survey content, updates share prices)

NEW YORK, April 15 (Reuters) - Shares of major homebuilders surged on Wednesday after the National Association of Home Builders said sentiment rose in April to the highest level since last October.

The NAHB/Wells Fargo Housing Market index rose to 14 from 9 in March, pushing the Dow Jones U.S. Home Construction Index .DJUSHB up 5.97 percent compared with a 1.25 percent increase in the broader Standard & Poor's 500 index.

But the sector started the day strong even before the news, thanks to a bullish note from analyst Carl Reichardt of Wachovia Capital Markets LLC, said Brian Daley, a sales trader with Conifer Securities.

“The group could be poised for a short-term rally,” Reichardt wrote, citing the salutary effects of lower mortgage rates and prices and the federal government’s tax credit for first-time homebuyers.

Reichardt sees a flow of positive macroeconomic news relevant to builders, especially since expectations are so low, and said first-quarter orders could come in better than he had originally expected.

The latest monthly survey of 160 homebuilders nationwide by Irvine, California-based John Burns Real Estate Consulting supports Reichardt’s notion that lower prices and rates might actually boost orders.

“We can point to a shift in builders’ optimism in many metros,” the survey said. “We think the improvement is attributable primarily to improved affordability.”

Traffic rose in every region except Southern Florida and no region reported declining net sales per community this month, according to the survey.

But Reichardt tempered his optimism as well. “This is clearly a trading call,” he wrote. “We are attempting to get ahead of stocks that sometimes get ahead of themselves.”

Most builders won’t be profitable in 2009 and only about half will reach profitability in 2010, he added.

Daley, too, has his doubts about the sustainability of any rally, pointing out that the inflection point between positive and negative sentiment for the homebuilders index is 50, which means it is still well entrenched in the negative.

He suspected much of the day’s activity was due to short covering and momentum traders attracted by the group’s volatility.

On the New York Stock Exchange, Lennar Corp LEN.N led the sector rally with an 11.7 percent gain at $8.69, while D.R. Horton Inc DHI.N rose 8.24 percent to $11.16. (Reporting by Helen Chernikoff; Editing by Tim Dobbyn, Bernard Orr, Richard Chang)