Trade Deficit Reduces In January

This morning, we see a real-time change in attitude among pre-market trading, and the reason may be related to two pieces of good news in economic data today: the January Trade Deficit (delayed because of the 5-week government shutdown) and new Mortgage Application data.

Starting with the Trade Balance (always a deficit, at least since 1980 and really fell off a cliff in the beginning of the 21st century), this came in at -$51.1 billion, far less than the -$57.7 billion expected and the -$59.8 billion initially reported in December. Whether futures on the Dow went from -50 points to +16 at this hour were directly related to this read in unclear, but certainly this can be taken as good news.

However, we also saw strength in Mortgage Applications in this very important spring real estate season, which is typically big for real estate sellers. New applications rose 8.9% week over week, and +5.7% year over year. This data looks to have been led by refinanced mortgage loans, which rose 12%, +8.5% year over year.

As most homeowners know, refi volume had plunged during the two years or so of rising interest rates. Now that those rates look to stay where they are for the rest of 2019 at least, mortgage rates have come down and homeowners are looking for new deals. That said, average loan size for a piece of real estate has just hit a new record high.

Two homebuilders have also released quarterly earnings data this morning: KB Home (NYSE:KBH) and Lennar (NYSE:LEN) . Both companies missed on the top line, though KB Home swung to a profit in its fiscal Q1 while Lennar missed bottom-line estimates by a penny in its fiscal Q1.

KB Home had carried a Zacks Rank #2 (Buy) prior to its report, and Lennar was a Zacks Rank #3 (Hold), Both homebuilding companies had Zacks Style Scores (Value - Growth - Momentum) of A. We will keep an eye on whether any of these change now that the earnings releases get absorbed by analysts.