It's a huge morning for the US economy

Good morning!

It’s a huge morning for the US economy as the housing market is in focus.

And so far, everything we’re hearing is good. 

Home Depot reported earnings before the market open that beat expectations with the company’s same-store-sales rising 8.9% in the fourth quarter. 

The company also raised its dividend, announced a share buyback plan, and said sales will increase 5.1%-6% in 2016.

In pre-market trade the stock was up 2.5%. 

Home Depot is a great barometer for not just the US housing market but the US consumer in general, and this chart from Rob Wilson at Tiburon Research Group shows how much of a powerhouse the company has been over the last couple years. 

Also on Tuesday morning, Homebuilding giant Toll Brothers also reported earnings before the bell that beat expectations with revenue totaling $928.6 million for its fiscal first quarter, topping expectations for $910.8 million. 

The company’s average home selling price in the quarter hitting $873,5000. 

But the real takeaway from the company’s report was its commentary on both the labour market and the US economy in general. 

And it’s all bullish. 

Toll Brothers CFO Martin Connor said, “We are experiencing modest lengthening of our production timelines associated with increasing complexity in our homes and a tighter labour market.”

So not only is Toll Brothers building nicer homes — which may or may not be a good thing, given that late last year we argued affordability would be a growing issue in the housing market in 2016 —  but it can’t find enough workers to get the job done. Higher wages, anyone? 

Additionally, Toll Brothers executive chairman Robert Toll said, “The stock market seems to be pricing in a steep decline in the economy and, along with it, our sector. We, on the other hand, are seeing signs that reflect strength and positive momentum in our business based on six consecutive quarters of year-over-year contract growth in both dollars and units. Our average contract sales pace per community was also up this quarter versus one year ago, and we believe it still has room to grow.”

And this quote perfectly capture the theme we’ve been hammering on: Wall Street might be spooked, but the Main Street economy is doing better than fine. 

Also this morning we’ll get data on home prices from the December Case-Shiller home price index, which is expected to show prices rose 0.9% in December over the prior month and 5.8% over last year. 

The January report on existing home sales is also expected to cross with the pace of sales declining 2.5% after December’s report showed the largest-ever increase of 14.7%. 

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