DR Horton Stock Soars on Earnings. Why That’s Good News for This Home Builder ETF.

Home builders have been out of favor. D.R. Horton’s earnings may change that. (Brandon Bell/Getty Images))

D.R. Horton’s earnings— and big stock move —show there may be life in home builders yet. Investors, investors, however, should tread carefully when comparing the two leading home-building exchange-traded funds.

The SPDR S&P Homebuilders ETF (XHB), with $2.5 billion in assets under management, is the larger of the two, but it favors building materials companies like TopBuild and retailers like Williams Sonoma; a true builder doesn’t appear until the eighth-largest holding, Toll Brothers .

The iShares U.S. Home Construction ETF (ITB), with $1.5 billion in assets, offers purer exposure to the sector, with nearly 50% of its weight in the top-five home builders, including D.R. Horton, Lennar , and Pulte . It’s a better representation of where home builders are today.

The chart of the iShares U.S. Home Construction, which recently traded at $101.62, shows price action grappling with the key $100 number.

A strong move from top holding D.R. Horton could help distance itself from that level. The home builder surged 15% to $151.14 on Tuesday following a strong earnings report, which would be its best day since April 6, 2020.

The daily chart below highlights the significance of the $140 level, which acted as support in 2024—and then resistance in early 2025—until today’s breakout.

This move also cleared a bullish inverse head and shoulders pattern, setting the stage for a potential rally toward the $170 level in the months ahead.

Home builders such as D.R. Horton are highly sensitive to interest rate movements, making it important to watch where Treasury yields are going. The 10-year yield has been making a series of lower highs, with key turning points coming after yields were rejected at 5% this past October, and then formed a doji candle, which speaks to indecision and potential changes from the prevailing direction, on January 14. Together, they signal a potential reversal.

With the current trajectory leaning lower—and an administration likely supportive of that direction—a move toward 4% heading into the fourth quarter appears likely.

Home is where the heart is. Shareholders may be happy into the end of the year.

Write to Doug Busch at douglas.busch@barrons.com