The Dow Sun is Rising as Toll Bros Leads the Builder Bounce

This morning, the Dow Jones Industrial Average (NYSE:DIA) is bouncing back like the Phoenix Suns have against the LA Lakers. The Dow even recaptured 10,000.

Additionally, homebuilder Toll Brothers (NYSE: TOL) reported a smaller than expected loss today. The fumes are still burning from the home buyer tax credit that expired April 30th.

As people scurried to take advantage of the credit last month, real estate transaction volume ticked up (keep in mind the post-Cash-for-Clunkers trade). Chairman Robert Toll said, “We don’t expect housing to roar back right away.”

Toll Bros (NYSE:TOL) lost $40.4 million, or $.24 cents per share, down from $83.2 million, or $.52 cents per share. Analysts expected a loss of $.23 cents per share, according to Thomson Reuters.

Revenue plunged 22 percent, to $311.3 million from $398.3 million. Analysts expected $321.9 million.

As Toll Bros missed consensus analyst estimates on both earnings and revenues, the stock is still rebounding on better sentiment to come in the future. I think investors and traders on Wall Street believe politicians will extend the home buyer tax credit prior to upcoming congressional elections as a catalyst for campaigning. If the tax credit is extended, the real estate market will not completely collapse again, potential buyers will be back, politicians gain votes, and the kool-aid smile emerges briefly once again.

Other homebuilder stocks climbing today on the higher home refinancing news are Dow components Caterpillar (NYSE:CAT) and Home Depot (NYSE:HD).

Disclosure: No positions in the companies mentioned.

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