Home Depot shares advanced 4.7% to $339.61 in Wednesday afternoon trading, providing a significant boost to the Dow Jones Industrial Average. The gain came despite a downgrade from Wolfe Research and fresh data showing a sharp decline in U.S. new-home sales, which heightened concerns about the housing market's impact on home-improvement demand.
Wolfe Research analyst Spencer Hanus lowered his rating on Home Depot to Peer Perform from Outperform, shifting to a neutral stance. Hanus cited the persistent lock-in effect in the housing market, where homeowners with low-rate mortgages are reluctant to move, as well as elevated interest rate risks and a lower return on invested capital following the company's major Pro-segment acquisitions. The firm expressed a preference for Lowe's in the home-improvement sector, noting that Lowe's shares also rose, gaining 3.1% to $220.18.
The downgrade came on the heels of disappointing housing data. The Commerce Department's Census Bureau reported that new U.S. single-family home sales fell 7.3% in May to an annual rate of 580,000 units, the weakest level since January and the second consecutive monthly decline. Mortgage rates remain near recent highs, with Freddie Mac reporting the average 30-year fixed rate at 6.47% as of June 18, only slightly below the previous week's 6.52%, keeping borrowing costs elevated for many households.
Despite the headwinds, Home Depot's stock rallied, hitting a session high of $342.11. The retailer was among the top movers in the Dow, contributing to a 483-point jump earlier in the session. According to MarketWatch, Home Depot and Sherwin-Williams together accounted for roughly one-third of the Dow's gain.
Home Depot's latest quarterly results painted a mixed picture. First-quarter sales rose 4.8% to $41.8 billion, but same-store sales, including online, increased only 0.6%. Net earnings slipped to $3.3 billion from $3.4 billion a year earlier. Chairman, President, and CEO Ted Decker noted that demand in the first quarter remained relatively similar to fiscal 2025, even as consumers faced greater uncertainty and housing affordability stayed under pressure. The company maintained its fiscal 2026 guidance, projecting total sales growth in the range of 2.5% to 4.5% and comparable sales flat to up 2.0%.
Home Depot continues to invest in expanding its business with professional contractors. The SRS Distribution unit completed the acquisition of Mingledorff's in May, an HVAC distributor with 42 outlets across five southeastern states. Decker said the deal will enhance the company's product and service offerings for Pros. However, there is a risk that the recent stock rally may outpace actual housing demand. Higher rates could keep current homeowners from moving, and demand for new homes may remain weak. If Pro acquisitions fail to generate sufficient sales growth, returns could suffer. Home Depot has identified housing conditions, credit markets, tariffs, and consumer demand as key factors that could cause actual results to differ from its outlook.
To boost summer traffic, Home Depot announced a July 4 savings event from June 25 to July 8, featuring deals on outdoor gear and appliances. While such promotions may help near-term store visits, the overarching question for investors remains how long the housing drag will persist.
