Shares of Home Depot (HD 3.06%) were moving higher today after the core Consumer Price Index (CPI) was lower than expected for December.
The news lifted stocks broadly, as falling inflation is good for the economy on a number of fronts, and Home Depot could also be a significant beneficiary.
As of 10:07 a.m., the stock was up 3.2% on the news.
Image source: Home Depot.
Will the housing market finally turn?
Overall CPI actually accelerated in December, coming in at 2.9% on a year-over-year basis and 0.4% on a month-over-month basis, which was up from 0.3% in November and the fastest rate in at least seven months.
However, core inflation, which strips out the more volatile categories of food and energy, cooled to 3.2% yearly growth, or 0.2% on a monthly basis. Economists had expected 3.3% annual growth.
Slowing inflation is good for Home Depot because it offers consumers some relief from higher prices, and, more importantly, because it makes it more likely that the Federal Reserve will continue to lower interest rates this year. The housing market is highly sensitive to interest rates, and mortgage rates have been elevated since the pandemic, slowing home sales, which has impacted Home Depot.
In its forecast last month, the Fed projected two rate cuts this year, though that could change if inflation falls.
Home Depot has struggled with the slow housing market, and lower interest rates would likely help the home improvement retailer bounce back.
What's next for Home Depot?
Home Depot reported another decline in comparable sales in its third-quarter earnings report, and growth is likely to remain muted until the housing market bounces back.
The peak selling season of the year, springtime, is around the corner, but meaningful rate cuts seem unlikely before then. Still, falling inflation will benefit Home Depot eventually.
