Home Depot was among the stocks that got drilled
The Federal Open Market Committee (FOMC) is widely expected to cut interest rates for the first time in more than a decade tomorrow. The last time the Fed cut rates after a string of hikes was back in September 2007, just before the financial crisis. Following that cut, several stocks took a massive hit over the subsequent month, including Dow component Home Depot Inc (NYSE:HD). (These stocks, meanwhile, rallied after the rate cut.)
Below are the 25 S&P 500 Index (SPX) stocks that fared the worst after the September 2007 cut, looking one month out. Per data from Schaeffer's Senior Quantitative Analyst, several housing stocks took a hit, though that preceded the sector's bubble bursting. In addition, construction material providers Lowe's (LOW) and Home Depot were pummeled, with the latter falling 12.9% into mid-October 2007. In fact, HD was the only Dow stock (at the time) to make the list.
Home Depot shares have been on fire in 2019, up roughly 27% year-to-date. In fact, HD just notched a record peak of $219.29 on July 15, blowing past former resistance in the $205-$215 region. At last check, the stock has dropped 0.1% to trade at $217.81.
Another post-rate-cut pullback would throw quite a few analysts off-guard. Considering HD's impressive run this year, it's not surprising the blue chip boasts 12 "buy" or better endorsements, compared to just seven lukewarm "holds" and not a single "sell" rating.
Meanwhile, traders wanting to speculate on HD's near-term options can do so at a relative discount still, with the company's next earnings release not until Aug. 20. The equity's Schaeffer's Volatility Index (SVI) of 17% is in just the 15th percentile of its annual range, pointing to relatively modest premiums being priced into short-term option contracts.
Likewise, the stock sports a Schaeffer's Volatility Scorecard (SVS) of 95 (out of a possible 100). This lofty reading indicates that HD shares have handily exceeded options traders' volatility expectations during the past year -- a boon for would-be premium buyers.