25 Stocks That Tanked After a Fed Rate Cut

HD suffered a sharp pullback after the Fed cut rates in 2007

by Andrea Kramer

Published on Jul 30, 2019 at 2:50 PM

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.

worst stocks after fed rate cut

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.

HD stock chart july 30

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.


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