While high interest rates have a widespread impact across the economy, there is perhaps no sector that feels the pain as badly as the housing market.

The number of new homes being built are an indicator of the health of the housing market—and the latest numbers have fallen flat. Just yesterday, the National Association of Builders pointed to high mortgage rates spooking builders and preventing them from constructing new homes, and today’s numbers from the US Department of Housing seem to confirm that sentiment.

The data showed that construction of new homes fell 5.5% to 1.28 million in May—the lowest level in four years. That’s 19.3% lower than in April, and well below the 1.38 million Wall Street analysts expected. Permits, which indicate future home building, also sank in May across single-family homes and apartments.

Fewer houses are being built exactly when more Americans want homes than ever—and it’s been that way for years now. The US had 4.5 million fewer homes than needed in 2022, up from the 4.3 million shortfall in 2021, according to an analysis from real estate firm Zillow released this week.

There are plenty of reasons for this shortage, including decades of under-building, skyrocketing demand for homes after the pandemic, and a lack of affordable housing. But the more prevalent reason is that high interest rates have kept mortgage rates high as well, which means the people who had already locked in lower mortgages are loath to leave their homes and burden themselves with higher interest payments.

While a tight housing market isn’t particularly pleasant for anyone trying to own a piece of the American dream, there is one group that has benefited: home builders.

Home builders can profit from any kind of housing market

Lennar, one of the biggest home building companies in the US, announced solid earnings earlier this week. The company reported $3.45 earnings per share, beating expectations of $3.23 a share, and brought in $8.8 billion in revenue, more than the $8.5 billion expected.

“The demand for housing remains strong, limited by affordability, interest-rates, and sometimes wavering consumer confidence,” said Lennar CEO Stuart Muller during the earnings call on Tuesday. “We are a home builder that builds affordable housing and strategic markets that fill a chronic supply shortage.”

KB Home, another major home builder, outpaced Wall Street’s forecasts for its second quarter earnings. The company reported earnings of $2.15 per share, beating expectations of about $1.80 per share, and revenue came in at $1.71 billion, beating expectations of $1.65 billion.

“We believe we are well positioned to achieve our goals over the remainder of 2024 with a backlog of committed buyers valued over $3 billion and meaningful improvement in our build times," CEO Jeffrey Mezger said in the earnings call.

Low housing supply and high demand have increased the prices of homes for sale, helping home builders profit—but with the housing market remaining tight, they’re beginning to see a slowdown in demand for new homes. Lennar projected lower-than-expected new orders and deliveries in the third quarter and investors balked, sending shares 5% lower on Monday.

However, Miller explained that Lennar “will be prepared” for the pent-up demand that will ultimately be unleashed when the Fed does cut interest rates, mortgage rates fall, and the housing market goes supernova (theoretically).

That could potentially lead to huge profits for home builders—and their shareholders.—LB

Nvidia is now the biggest company on the market, and gets to reap the rewards that come with its new position as top dog—including a larger share of a key tech sector ETF that will pour millions of dollars into the stock tomorrow.

🟢 What’s up

• Gilead jumped 8.46% after clinical data revealed that its new twice-a-year shot prevents 100% of HIV cases.
• Penn Entertainment rose 9.93% on the news that Boyd Gaming has approached its competitor with an acquisition offer.
• Accenture rose 7.30% after the IT consulting company missed earnings estimates but more than made up for it with bullish bookings data thanks to AI.
• Darden Restaurants rose 1.53% after a mixed earnings report. Its acquisition of Ruth’s Chris Steak House propped up earnings, while Olive Garden’s same-store sales came in flat, probably because I eat several hundred free breadsticks there every month.

What’s down

• Trump Media & Technology Group fell 14.56% after the SEC ruled that early shareholders can resell their stock in the company, diluting new shareholders—though providing upward of $247 million in funding for the beleaguered company.
• Nikola plummeted 31.46% after the company announced a 1-for-30 stock split in a bid to stay listed on the Nasdaq.
• Kroger fell 3.27% despite beating analyst revenue estimates in its fiscal first quarter as investors digest the chances of the company sealing a deal to buy Albertsons.
• Tempest Therapeutics dropped 29.47% upon the release of the latest trial data for its liver cancer treatment.
• Jabil fell 11.45% today after the electronics supplier beat earnings estimates but warned of softer growth in the year ahead.

Triple witching might sound more like something you’d find in astrology than in finance, but the event can cause even more chaos than mercury in retrograde.

Tomorrow is triple-witching day, which is when stock options, stock index futures, and stock index options contracts expire on the same trading day—causing trading volume, along with volatility, to skyrocket. The event occurs quarterly on the third Friday of March, June, September, and December.

Triple witching directly affects investors who are trading derivatives like futures contracts and options, rather than regular old buy-and-hold investors. But even if you’re not planning on trading tomorrow, the event can still affect the performance of individual stocks. Traders often adjust their portfolios to prepare for potentially heavy trading volume and big swings in the market on a triple-witching day, ironically causing more volatility.

Triple-witching hour occurs in the last hour of trading on triple-witching days, so between 3pm and 4pm ET tomorrow, which is also when volatility tends to peak.

Will Nvidia bewitch investors?

The star of tomorrow’s triple witching is, to no surprise, Nvidia (NVDA). Shares of the chipmaker, which recently became the largest US stock based on its market cap, have seen unprecedented options trading, particularly call options, while shares have risen higher and higher. That sets the stock up for an especially volatile triple witching. About one third of outstanding options tied to Nvidia are going to expire tomorrow, according to MarketWatch.

On top of that, Nvidia’s stock split and its rebalancing into the $71 billion Technology Select Sector SPDR ETF (XLK) on Friday means that even more cash will be thrown at the company’s stock than usual, pouring yet more fuel on tomorrow’s fire.—LB

• Forget meme stocks—bonds are the hot new retail investment thanks to yields that haven’t been this high since before the iPhone was invented.
• A rate cut might seem like it would be good news for investors, but history shows that the S&P 500 usually falls after interest rates get slashed.
• Being fearful when others are greedy is easier said than done, particularly when the market keeps on reaching new all-time highs. But if you can manage it, the strategy can be quite profitable.
• Pharma bro/worst human ever Martin Shkreli and Baron Trump have claimed they created the new DJT crypto token, which jumped in price this week after rumors emerged it was somehow connected to former President Donald Trump.
• Small-cap stocks have struggled for years now, and investors have fled the investment in droves—which may be exactly the contrarian signal needed to kickstart a rally.
• Europe’s IPO market looked primed for a comeback…until it didn’t.

A triple witching isn’t the only thing investors should be keeping an eye on tomorrow.

Preliminary Services & Manufacturing PMI readings will come out first thing, and each will provide insight into their respective sectors. Manufacturing has been in the dumps recently, with the last reading falling to 48.7 in May from 49.2 in April—remember, anything under 50 indicates the sector is contracting rather than expanding. But the service sector has been stronger, rising from 49.4 in April to 53.8 in May.

The US Leading Economic Index (LEI) will give investors a preview of how the economy is faring. This collection of indicators features 10 different components compiled from various reports on different parts of the economy, including consumer expectations, new building permits, unemployment applications and more. It’s a great forward-looking indication of how the economy is faring, but it hasn’t been pretty as of late—the LEI declined in both March and April.