Welcome back, investors, to Breakfast with the Fool. I just put the coffee on; it'll be perked in a minute. Meanwhile, grab yourself a bagel (don't bogart the cream cheese, please) and pull up a chair as we scan the morning papers together.
Gimme a "B" ... Gimme an "E" ... Bernanke gains fans
Yesterday's big news was, of course, the shocking prediction from Fed Chairman Ben Bernanke that the U.S. economy could pull out of recession as early as the end of this year, and begin to pick up steam in 2010. This morning, more than one pundit seems to be buying into that thesis. Oppenheimer initiated coverage on a slate of big banks and -- grand news -- it doesn't think Bank of America (NYSE: BAC) or Citigroup (NYSE: C) are going under, while Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) just might be out-and-out "buys."
Next door at Wall Street brokerage Jefferies & Co., both Home Depot (NYSE: HD) and Lowe's (NYSE: LOW) received upgrades this morning. Jefferies' report latched onto cost-cutting efforts at Home Depot, and opportunities for growth at Lowe's. But the analyst also believes we will see improvement in the housing sector within the next 12 to 18 months. Says Jefferies: "we are encouraged by greater affordability and possible improvement in [banks'] willingness to lend as bank balance sheets see some repair."
And wonder of wonders, there may even be some basis for this optimism. This morning, the U.S. Commerce Department reported a startling 22% surge in housing starts for February. Apartment buildings comprise the bulk of the increase, as this segment of the housing market jumped 82%. Longer-term indicators, like applications for building permits, pointed northward as well in February, rising 3%, with permits for single-family homes up a striking 11%.
What's it mean to today's trading?
The raft of good news could provide a shot in the arm for homebuilders, with firms having significant exposure to the multifamily housing market -- such as D.R. Horton (NYSE: DHI) and Lennar -- being possibly the best-positioned to reap gains from this morning's reports.
No promises, of course; you pays your money and you takes your chances in this market. But crazy as it sounds after endless months of nothing but bad news, the first shoots of a new spring for the stock market appear to be peeping through the snowcrust. Whether they'll immediately be killed off by another frost is anybody's guess.
So what's a Fool to do in the face of uncertainty? The exact same thing we've always advised: Invest in sound companies with superb management at good-to-great prices. Even if today's reports turn out to be false alarms, the recovery will come eventually. The last thing you want is to be caught with all your cash in a savings account earning 1% when it happens.
Are Jefferies and Oppenheimer jumping the gun? Is Bernanke crazy as a loon? Tell us what you think. Post your comments below, and Fool on!