Heat check: Home Depot rallies to early 2022 levels on interest rate relief

Home Depot (NYSE:HD) rallied 1.47% in afternoon trading on Tuesday after earlier in the session coming within $0.67 of trading over $400 for the first time since the first week of 2022. The home improvement stock has been the 6th leading gainer in the Dow Jones Industrial Average since the Federal Reserve rate cut announcement was made last week.

While Home Depot (HD) did not dazzle with its Q2 earnings report, the tone from management has been fairly positive. Comparable sales decreased 3.6% during the recent quarter, vs. -2.4% consensus. Customer transactions were down 1.8% and the average ticket of customers was 1.3% lower to $88.90. Sales per retail square foot dropped 3.6% to $660.17. The company’s skill at managing costs and delivering better-than-expected EBIT margins helped offset weakness attributed to consumer spending, added by assurances that the “long-term fundamentals in home improvement are strong,” said CEO Edward Decker on the company’s earnings call. With the expectation for mortgage rates to come back down to 6%, spending in kitchen and bathroom remodels, lighting and flooring will revert to earlier levels, Decker said.

Home Depot (HD) shares are swapping hands at more than 10% above its 100-day and 200-day moving averages, which has some traders questioning if the interest rate cut rally is overcooked.