NEW YORK ( TheStreet) -- Homebuilder stocks lost ground Friday to a greater extent than the broader equities markets, but the poor performance of building-materials sales within the disappointing retail report might not be the only reason for the selloff.

It's been a two-day span of schizophrenic trading in homebuilder stocks. On Thursday, the sector as a whole spiked 5%. It wasn't just Thursday's broad-based rally that lifted homebuilders, either -- just as it isn't wise Friday to read too much into whatever weakness was demonstrated by the building-material and garden-supply sub-category of the retail-sales metric.

Standard & Poor's released a report on Thursday about homebuilders, arguing that the industry has bottomed out and that it's time for the surviving builders to acquire new land and gain market share.

The S&P report garnered some attention from investors waiting for signals that major homebuilders such as D.R. Horton ( DHI) and Toll Brothers ( TOL) will soon move out of a defensive posture and become aggressive with their strategies.

On Wednesday, Stifel Nicolaus removed its last remaining sell recommendations on homebuilder stocks -- though it still doesn't have a single buy rating. The firm lifted D.R. Horton, MDC Holdings ( MDC) and Pulte Group ( PHM) to hold.

In the market selloff over the past month, the three stocks had fallen below book value, and Stifel Nicolaus said its call was based purely on valuation.

Senate Majority Leader Harry Reid (D-Nev.) also announced on Thursday plans to extend the homebuyer tax credit until the end of the summer, but the plan is primarily to make sure homebuyers who did make purchases before the April 30 deadline have extra time for the mortgage paperwork leading up to closing.

On Friday, the Commerce Department reported that retail sales in May tumbled an unexpected 1.2%, the first decline since September 2009. One striking data point in the report was the 9.3% plunge in sales at building-material and garden-supply stores.

Most of the major homebuilders were down on Friday, including Standard Pacific Group ( SPF), Pulte, KB Home ( KBH), D.R. Horton, and MDC, but it was just a matter, in most cases, of erasing Thursday's big gains.

Meanwhile, the broader U.S. equity indexes were also trading in the red, albeit modestly.

Stifel Nicolaus' housing analyst, Mike Widner, viewed the Friday selling as a minor affair, and mostly indicative of the way housing stocks are used as high-beta, short-term trading plays.

Over the past two years, homebuilder stocks -- which are still primarily owned by institutional investors -- have become volatile proxies for betting on U.S. economic data. Therefore, a poor retail sales reading will lead some investors to short the sector.

A trader might even go long Home Depot stock while putting shorts on homebuilders as a hedge, which doesn't reflect sentiment about a homebuilder stock recovery, specifically.

"You can't short GDP, but you can short builders," Widner said.

Widner also noted that the big decrease in the builder sub-category of retail sales followed an 8.4% jump in April.

Major U.S. homebuilders like D.R. Horton and Toll Brothers don't exactly go shopping for their materials at Home Depot ( HD) and Lowe's ( LOW), anyway. The retail sales number is a reflection of consumers buying items like garden hoses for the spring and summer, and local mom-and-pop contractors remodeling bathrooms, not an indicator of the building activities of the major publicly traded homebuilders.

Homebuilder stocks are 30% cheaper than they were a month ago, and that makes a pure valuation call more important to the stock-trading outlook than the various bits of macroeconomic data filtered by the market day-to-day, analysts say.

Over the past two years, whenever homebuilder stocks fell below book value, it indicated a floor in those share prices and heralded a rebound, Widner said.

"With homebuilding stocks, it doesn't pay to be too clever about bottoms and macroeconomic catalysts," he added.

-Reported by Eric Rosenbaum in New York.

Follow TheStreet.com on Twitter and become a fan on Facebook.

Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

More from Stocks

Finding Stocks Right for You: Cramer's 'Mad Money' Recap (Friday 8/25/18)

Finding Stocks Right for You: Cramer's 'Mad Money' Recap (Friday 8/25/18)

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain

Dow and S&P 500 Decline, Energy Shares Fall as U.S. Crude Oil Slides 4%

Dow and S&P 500 Decline, Energy Shares Fall as U.S. Crude Oil Slides 4%

Replay: Jim Cramer on the Markets, 10-Year Yield, Oil Prices and Foot Locker

Replay: Jim Cramer on the Markets, 10-Year Yield, Oil Prices and Foot Locker