Amid the gathering gloom over the global and U.S. economies, building stocks have sunk. Most of the builder group has fallen back to the levels of last summer, which, while up from the lows of early 2009, had not yet responded to the sales burst fueled by the first and second federal tax credits.

Among the blue-chips, as of mid-afternoon Tuesday, Toll Brothers (TOL) was back below $16.50, NVR was at $644.68 (down from $769.50 as recently as April 22) and M.D.C. was a scant seven cents off its 52-week low at $26.67. Pulte (PHM) was at $8.49, down from $13.91 at the end of April.

More analysts are taking notice. Tuesday morning, Zelman & Associates raised KB to a "buy" from "hold." Also on Tuesday, Keefe, Bruyette & Woods raised Lennar Corp. (LEN) to "outperform" from "market perform." And David Goldberg at UBS hiked Ryland (RYL) to a "buy" based on its current valuation (trading at $15.84 mid-afternoon Tuesday).

In his investor note, Goldberg noted that the builder group is down 28% collectively since May 3 and said he expected continued negative data in the near term. Still, he wrote, "We believe RYL's -31% move over the same time is overdone given its more defensive strategy." So, while he still advises investors to remain on the sidelines for a more attractive entry point for the group, he raised Ryland to buy but lowered his price target to $22 from $24.

On Monday, Standard & Poor's Ratings Services raised its outlook on D.R. Horton Inc.'s (DHI) debt ratings to stable, saying it expected the home builder to return to profitability in its current fiscal year. The rating is still well into junk territory at a BB- but is an improvement.

And The Wall Street Journal's "Heard on the Street" column on Monday focused on the builders, saying that even with all the bad news, "the inventory overhang is unlikely to be unleashed in a hurry. Government programs to delay foreclosures have kept supply roughly balanced with demand, allowing prices in many markets to stabilize. Politicians remain under pressure to prevent any acceleration in foreclosures. If government influence persists, home builders probably will enjoy a gradual recovery in sales. And without any significant declines in home prices, their assets should hold up. That would make current valuations attractive."

None of that could help the builder stocks on Tuesday as they were caught in an overall market swoon over lousy consumer confidence numbers, lowered growth estimates in China and continued neuralgia in the credit markets. There's little in the way of macro housing data scheduled on Wednesday other than the Mortgage Banker's Assn. report on mortgage activity. Pending Home Sales on Thursday should provide an indicator of whether the slowdown of May will continue into June and beyond in the existing home market.

Also, summer begins in earnest this weekend for Wall Street, or what's left of it. Beginning now and increasing into and through August, the senior traders and strategists are often off in the Hamptons, particuarly on Fridays, leaving minions in charge. This usually translates into lackluster trading sessions. We'll see if it still does.