Home Depot shares are showing signs of life as optimism builds for an interest rate cut at next month’s Federal Reserve meeting. The next test is earnings. The Club stock, which is one of the 30 names that make up the Dow Jones Industrial Average , is having its best month of the year, even with Monday’s more than 1% slide. Tuesday’s earnings report before the opening bell, however, will spotlight the retailer’s actual business performance and may determine where shares go from here. They have gained nearly 7.5% so far in August. “Home Depot, the company, is not doing well. Home Depot, the stock is on fire,” Jim Cramer said during our August Monthly Meeting last week. “It’s a stock that needs lower rates,” Jim added, to bring down rates on mortgages and home equity loans. HD YTD mountain Home Depot YTD And, lower rates are, indeed, what the market expects from the Fed, with a more than 80% chance of a September cut, according to the CME FedWatch tool , and at least one more by year-end. Mortgage rates, which have followed the 10-year Treasury yield south since late May, hit their lowest levels since late October 2024. As of last Thursday, the 30-year fixed-rate mortgage was 6.58%, according to Freddie Mac , the Federal Home Loan Mortgage Corporation. Below 6.5% for a 30-year has historically been seen as a level that spurs housing activity, which Home Depot needs as a supplier to homebuilders, contractors, and homeowners doing their own renovation projects. “We’ve seen the last couple of weeks, as rate cut odds improve, what could happen,” said Jeff Marks, director of portfolio analysis for the Club. The real estate market has been stalled due to those high home prices and elevated mortgage rates. The latter is especially punitive because so many people secured super-low rates during Covid, which are keeping them put. During sluggish activity from do-it-yourself customers, Home Depot has been taking steps to bolster its business aimed at professionals. Last year, Home Depot acquired SRS Distribution, a leading supplier of roofing and building materials, in an $18.25 billion deal. The home improvement giant then doubled down this year, with a successful $4.3 billion bid to acquire GMS back in June. “We believe the SRS platform has established a firm foundation for capitalizing on Complex Pro that is performing well,” wrote Stifel analysts in a note to clients Sunday. The complex pro segment in the home improvement industry refers to large-scale projects handled by contractors. Analysts added, “We view the potential GMS acquisition positively with modest synergy potential with HD leveraging its financial strength to invest behind favorable long-term construction trends amid difficult industry conditions.” In addition to listening for any further details on the GMS transaction and the SRS integration, investors on Tuesday will get a look at Home Depot’s spring and early summer sales — a period that Jim has called Home Depot’s Christmas . As my colleague Kevin Stankiewicz wrote in an earnings preview over the weekend, “The market is looking for a companywide same-store sales increase of 1.3% in the July quarter, according to FactSet. That would mark a significant acceleration from the 0.3% drop seen in the February-to-April period. Investors also will be looking for any tariff-related hit to margins after executives said in May they expected to ‘generally maintain’ current prices.” Bottom line While encouraged by Home Depot’s price action lately, the stock is coming into Tuesday’s earnings print hot, which Jim has often said makes him cautious. “It’s such a hard stock to own because we’re playing rates. We’re not playing the business,” he added. We may get a hint on rates before the Fed’s meeting next month. On Friday, Fed chief Jerome Powell is set to address the central bank’s annual confab in Jackson Hole, Wyoming. (Jim Cramer’s Charitable Trust is long HD. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
What’s driving Home Depot’s August stock rally and can it continue?
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