Housing Costs: Home Depot Shares Climb 25% After Midterm Wins

The U.S. housing market has remained stagnant for months, weighed down by high borrowing costs and inflationary pressures from energy and trade policies. On Wednesday, Home Depot shares jumped 6.5%, reversing a long period of losses and putting the stock in positive territory for the year.

The rally follows Tuesday's midterm elections, in which Democrats secured control of both the House and the Senate. This shift has raised expectations that Congress will act to address housing affordability. Simultaneously, oil prices dropped on hopes that the Middle East conflict will not worsen, which in turn lowered bond yields.

Since the 10-year Treasury yield peaked above 5.3% on Oct. 5, Home Depot stock has risen more than 25%. The company is on track for a fifth consecutive positive week, its longest winning streak since late 2024. Mortgage rates track the long end of the bond market. The 30-year fixed-rate mortgage hit 7.5% in the week of Oct. 14, the highest level since November 2023, according to the Mortgage Bankers Association. Rates have fallen for two weeks but remain a full percentage point higher than a year ago.

Jim Cramer, whose charitable trust holds the stock, said on Wednesday that the retailer is the top pick if rates decline or the do-it-yourself market recovers. He argued that the election outcome could lead to tariff relief, noting that working people have been hurt by higher gasoline prices and tariffs on goods sold at Home Depot.

The company has received refunds after the Supreme Court overturned most of President Donald Trump's sweeping tariffs earlier this year. Chief Financial Officer Richard McPhail stated on the August earnings call that these refunds are being used to offset unplanned and rising cost pressures throughout the year, rather than immediately lowering shelf prices.

Risks persist as the stock has recorded lower highs and lower lows over the past year. Oil prices spiked in the summer due to tensions with Iran, a factor Cramer has called a wildcard. Wednesday's drop in crude suggests traders believe the election results may help resolve the conflict.

Cramer and portfolio director Jeff Marks will discuss the market outlook and the club's 31 holdings, including Home Depot, at the New York Stock Exchange on Friday. The CNBC Investing Club's annual meeting livestream begins at 10:30 a.m. ET.