Home Depot shares extended their recent rally with a 6.5% gain on Wednesday, turning positive for the year. The stock has climbed more than 25% since the 10-year Treasury yield reached a two-decade high above 5.3% on Oct. 5, and is on track for a fifth consecutive positive week.
The advance has come amid hopes that political developments could ease affordability pressures and revive the sluggish housing market. Oil prices fell on expectations that tensions in the Middle East might not worsen, while bond yields also declined. Jim Cramer said lower rates or a stronger do-it-yourself market could help Home Depot maintain its position as a leading stock.
Interest rates remain a key factor for the retailer. Mortgage rates tend to follow longer-term Treasury yields, and the average 30-year fixed rate reached 7.5% in the week of Oct. 14, according to the Mortgage Bankers Association. Rates have since fallen for two consecutive weeks but remain a percentage point above their level a year earlier, weighing on housing activity and demand for renovations and new construction.
Home Depot has also faced pressure from tariffs and higher costs. Although the Supreme Court overturned most of President Donald Trump’s sweeping tariffs earlier this year and companies including Home Depot received refunds, the rollback did not reverse price increases already passed on to customers. Chief Financial Officer Richard McPhail said in August that the refunds were being used to offset unplanned and rising costs.
The recent gains follow a difficult period in which the stock recorded lower highs and lower lows. Cramer said the election outcome could bring relief on tariffs, while the sharp drop in crude prices on Wednesday suggested traders saw a possibility of progress toward resolving the Iran war. The article noted that the outlook for rates, housing demand and costs will be important in determining whether Home Depot’s rally can continue.
Sources: CNBC Markets.