Rising Inventories Pressure Lennar, D.R. Horton, KB Home, Toll Brothers

Homebuilders are getting hammered today following a report by the National Association of Realtors that showed inventories of unsold houses rose to a 23-year high in April. As a result, the Select Sector SPDR Homebuilders Fund (XHB) has dropped nearly 3% this afternoon compared to the S&P 500 Index's loss of 1.2%.

Digging around the housing sector, we find D.R. Horton (DHI) down 3% and Lennar (LEN) down 1.9%. However, some of the heaviest losses are coming from Toll Brothers (TOL), which has dropped 3.7%, and KB Home (KBH), which has declined 4.32%

Surprisingly, sentiment is somewhat optimistic toward KBH. The Schaeffer's put/call open interest ratio for the stock sits at 1.23, which is lower than three-quarters of all the readings taken during the past year. In other words, options players have been more optimistically aligned toward KBH only 25% of the time during the past 12 months.

Meanwhile, the shares of TOL are poised to finish their first week below their 10-week and 20-week moving averages since late March. During the past several weeks, these trendlines had acted as key support, holding Toll Brothers above the 20 level.

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