Home Depot was one of our biggest post-election winners. Wednesday's 6.5% gain extended a recent hot streak and flipped the struggling stock positive year to date. The question now for patient Home Depot investors like us is whether this is the turning point we've been waiting for, or just another head fake. Home Depot and other housing stocks rallied on the hope that the Democratic sweep on Capitol Hill in Tuesday's midterms could lead to an easing of America's affordability crisis and a pick-up in the stagnant housing market. Oil prices, which have driven rekindled inflation this year, tumbled on hopes that the Middle East conflict may not worsen. Bond yields, which are sensitive to inflation expectations, also fell. "If rates come down or [the] do-it-yourself market heats up, you're going to have the number one stock," Jim said during Wednesday, referring to Home Depot. "We have the number one stock." The bounce in Home Depot goes beyond Wednesday, which was also a stellar session for the overall market. It's going to take more than a day to see whether…
Cramer: What must happen for Home Depot to keep its 25% monthlong rally going
In short
The retailer's recent 6.5% Wednesday surge was bolstered by hopes for housing affordability improvements under a new congressional majority alongside easing energy costs. Nevertheless, 30-year fixed-rate mortgages remain a full percentage point higher than last year despite easing from October peaks of 7.5%. In response to these market pressures, management has actively pursued strategic acquisitions targeting professional contractors while outpacing rival Lowe's in same-store sales growth.
Key points
- Sustaining the current equity rally will require declining interest rates to ease existin…: Sustaining the current equity rally will require declining interest rates to ease existing constraints on home renovations and new construction.
- Strategic acquisitions focused on professional customers have helped the company outperfo…: Strategic acquisitions focused on professional customers have helped the company outperform competitor Lowe's in critical same-store sales comparisons.
- Market analysts believe lasting upside momentum relies on reviving the do-it-yourself seg…: Market analysts believe lasting upside momentum relies on reviving the do-it-yourself segment and providing relief from high consumer costs.