Today’s 3 Best Stocks: Avon Products, Inc. (AVP), Masco Corporation (MAS), Assurant, Inc. (AIZ)

It’s a rare day when the U.S. budget deficit moves the markets, but a surprise surplus of $2.9 billion in January did just that today. According to the U.S. Treasury Department, higher Social Security taxes brought in an extra $9 billion in revenue in January and brought the trailing-four-month budget deficit to “just” $290.4 billion. That’s about $60 billion lower than where we were at the same time last year.

Even the most remote possibility that the U.S. budget deficit is narrowing gave the broad-based S&P 500 yet another reason to head higher. On the day, the S&P 500 finished higher by 2.42 points (0.16%) to close at 1,519.43.

Today’s best-performing stock was also a complete surprise to everyone: Avon Products, Inc. (NYSE:AVP). The cosmetics company spiked 20.3% higher following much-better-than-expected fourth-quarter results and plans to seek strategic alternatives for its Silpada jewelry division. Overall, sales dipped 1% to $2.96 billion, slightly below estimates, but it reported an adjusted profit of $0.37 per share, crushing the Street’s expectation of just $0.27. Avon is making plans to pull out of the South Korean and Vietnamese markets in order to save $400 million annually by the end of 2015, but it hasn’t done much to address its flat sales. Having declined Coty’s buyout offer last year, I still have little confidence in Avon’s growth plans and would highly suggest not chasing today’s move higher.

Home-improvement and building products provider Masco Corporation (NYSE:MAS) also turned in a double-digit gain, rising 12.5%, after announcing strong fourth-quarter earnings results. Masco reported a 9% increase in sales to $1.89 billion and a $0.04 per share profit as all five of its business segments grew for the first time since the housing downturn began. Wall Street estimates had only called for $1.79 billion in sales and a $0.01 loss!

Masco has been coasting on strong results from such homebuilding companies as D.R. Horton, Inc. (NYSE:DHI). D.R. Horton, the nation’s largest homebuilder, more than doubled its net income year over year, crushed EPS estimates by $0.06, and posted sizable home sales price gains over the previous year. Not surprisingly, Masco’s North American sales jumped 12% in the latest quarter compared to a 1% sales decline overseas. Homebuilders such as D.R. Horton and building products providers such as Masco could continue to feed off each other’s results domestically and head even higher.