Despite Second Daily Pop, Correction May Still Be At Hand (UPS, WHR, DHI, ANN, MHO)

Stocks rallied for a second-straight day, bouncing back from last week’s declines. Corrections are part of a healthy market and aren’t all that uncommon, and after huge gains from the market’s lows, we think we could be in store for a small correction before heading higher. Making short-term directional calls is a difficult endeavor, however, and we certainly wouldn’t be making huge portfolio adjustments. We might just keep a little extra cash on the sidelines in case this does play out.

The Homebuilder Stocks Index was the top performing tickerspy Index on the day, led by M/I Homes (MHO) with a 18% gain.

Stocks rose on the day, with the Dow up 111 points to 10,297. The S&P climbed 14 points to 1,103, while the Nasdaq rose 19 points to 2,190. Oil jumped $2.87 to $77.30 a barrel, while gold added $13.20 to $1,118.20 an ounce.

In economic news, the National Association of Realtors announced that its Pending Home Sales Index, based on contracts signed in December, edged up 1.0% to 96.6, in line with economist expectations.

In earnings news, United Parcel Service (UPS) posted a Q4 profit of $1.26 billion, or 75 cents per share, down -10% from $1.38 billion, or 83 cents per share, a year ago. Revenue fell -3% to $12.38 billion. Analysts were looking for EPS of 74 cents on revenue of $12.22 billion. Looking forward, the company guided for 2010 EPS of between $2.70-$3.05, compared to the $2.80 consensus. The stock rose 0.4%. Forty-two Pro investors counted the stock among their top-15 holdings at the start of Q4, while 335 tickerspy members included the stock in their portfolios.

Shares of Whirlpool (WHR) jumped 8.1% after the appliance maker issued a strong 2010 outlook. For Q4, the company earned $95 million, or $1.24 per share, more than double the $44 million, or 60 cents per share, in net income it recorded a year earlier. Adjusted EPS was $1.64. Sales rose -13% to $4.86 billion. Analysts were looking for EPS of $1.32 on revenue of $4.44 billion. Looking ahead, the company forecast a 2010 profit of $6.50-$7.00 a share versus estimates of $6.45 a share.

Builder D.R. Horton (DHI) reported a surprise Q4 profit, earning $192 million, or 56 cents per share, compared with a year-ago loss of -$62.6 million, or -20 cents per share. The results included a $149.2 million tax benefit and a -$1.2 million charge for inventory write-offs. Revenue rose 23% to $1.11 billion. The Wall Street consensus was for a loss of -13 cents on $960 million in revenue. The stock climbed 10.9%.

Ann Taylor (ANN) shares jumped 17.6% after the women’s clothing retailer announced that its Q4 earnings would top estimates and be “substantially higher” than last year. The retailer also said same-store sales would be down around -7% at its namesake stores, which was better than expected, and up 2% at its LOFT brand, in line with expectations. Total sales were approximately $470 million, well ahead of the $453.3 million estimate. Five Pro investors counted the stock among their top-15 holdings at the start of Q4, while 53 tickerspy members included the stock in their portfolios.

Tags: ANN, DHI, MHO, UPS, WHR