Home Depot Stock Surges 25% as Bond Yields Cool After Midterms

Home Depot shareholders are watching a long, quiet climb that could finally turn the stock positive for the year. The company posted a 6.5% gain on Wednesday, a move that pushed its year-to-date performance into the black after a difficult stretch. This jump extends a steady run of gains that has lifted the stock by more than 25% since early October.

The rally tracks closely with the bond market. Since the 10-year Treasury yield hit a two-decade high above 5.3% on Oct. 5, Home Depot shares have risen in step with falling rates. The stock is on pace for five straight positive weeks, which would be its longest winning streak since the turn of 2024. Mortgage lenders report that the 30-year fixed-rate mortgage rose to 7.5% the week of Oct. 14, a level not seen since November 2023. Rates have since dropped for two consecutive weeks, though they remain a full percentage point higher than they were a year ago.

Investors see a direct link between these interest rates and Home Depot's sales. High borrowing costs have kept a lid on housing activity, slowing both new construction and renovation projects. Jim Cramer, who manages a portfolio of 31 Club holdings, pointed to the connection in a broadcast on Wednesday. He noted that if rates continue to fall or the do-it-yourself market picks up speed, the stock has the potential to lead the sector.

The recent midterm elections played a role in this optimism. Democrats won majorities in both the House and the Senate on Tuesday. Market participants hope this shift will lead to policies that address the affordability crisis. Cramer suggested the new congressional leadership could also bring relief on trade barriers. He argued that working people have been squeezed by higher gasoline prices and tariffs on goods bought at Home Depot, and that this pressure may ease under the new administration in Congress.

Company leaders are also working to manage costs despite external headwinds. Home Depot has focused on growing its business with professional customers through acquisitions. The retailer has also matched or exceeded its rival Lowe's in same-store sales growth. However, the impact of earlier trade measures has lingered. Cramer noted that prices raised by tariffs are not likely to drop immediately, even if the levies themselves are rolled back.

Richard McPhail, the company's chief financial officer, addressed these costs during the August earnings call. He explained that refunds received in the second quarter are being used to offset unplanned and rising cost pressures throughout the year. One major pressure point is oil. Tensions in the Middle East have driven crude prices up, adding to inflation. Oil prices fell sharply on Wednesday, fueled by hopes that the new political climate might help resolve the conflict with Iran.

The market reaction on Wednesday was broad. The overall stock market had a strong session, and housing-related names rallied alongside Home Depot. Bond yields, which are sensitive to inflation expectations, also declined. This drop in yields is critical because mortgage rates tend to follow the long end of the bond market curve. A sustained decline in yields would lower the cost of borrowing for homeowners, potentially unlocking stalled deals.

For investors who have held the stock through recent lows, the current trend offers a break from a pattern of lower highs and lower lows. Cramer's team is preparing to discuss the position at the firm's annual meeting. The meeting will take place at the New York Stock Exchange on Friday at 10:30 a.m. ET. Cramer and portfolio director Jeff Marks will outline their outlook for the market and their 31 holdings. The session will be livestreamed for members.

Jim Cramer's Charitable Trust holds a long position in Home Depot. The trust receives trade alerts before Cramer executes trades in the portfolio. He waits 45 minutes after sending an alert before buying or selling. If he has discussed a stock on television, he waits 72 hours after the alert to execute the trade.