The Dow Jones Industrials (DJINDICES:^DJI) gave up a modest amount of ground last week. But in the coming week, Dow investors have a lot to look forward to. Home Depot (NYSE:HD) will look to close out the first-quarter earnings season for the Dow Jones Industrials, while the Federal Reserve will be in the news with its latest release of FOMC meeting minutes, and that could move shares of financial giants Goldman Sachs (NYSE:GS) and JPMorgan Chase (NYSE:JPM).
Home Depot has given investors one of the most impressive growth rates in the Dow Jones Industrials over the past several years, as the home-improvement retailer has managed to find ways to boost its business even during periods in recent years when the housing market wasn't as healthy as it has been lately. Now that housing has recovered, Home Depot has the opportunity to accelerate its growth by making use of its dual approach of courting both housing contractors and do-it-yourself homeowners. Competition has started to get stronger in the industry as Home Depot's main rival has stepped up its game and produce some impressive results of its own. This week, look to see if Home Depot can sustain its track record of profit growth and give positive signs for its near-term future.
Meanwhile, the Federal Reserve will release its latest Federal Open Market Committee minutes this week. As expected, the Fed chose at the end of April to keep interest rates at current low levels but to further reduce its bond-buying activity under quantitative easing. The reduction keeps the Fed on pace to eliminate bond buying completely by the end of this year.
For JPMorgan Chase and Goldman Sachs, what's most surprising about the end of quantitative easing is that it hasn't yet produced a huge spike upward in interest rates. After all, just the threat of reductions in bond buying a year ago made rates almost double. But worries about the stock market's health have made investors reconsider their risk tolerance, and that in turn has led to moves out of stock indexes like the Dow Jones Industrials and into perceived lower-risk assets like Treasury bonds. That trend has been good news for Dow banks JPMorgan and Goldman Sachs for a couple of reasons. JPMorgan has a mortgage-banking business that could see a reawakening of refinancing activity if rates stay at or fall below their current 2.5% level. Goldman could benefit from corporate refinancing at current lower rates, with at least one final wave of bond issuance before the falling demand for bonds from the Fed's exit stops the downward pressure on rates.
This week, the Dow Jones Industrials could continue to see volatility as investors assess the potential for a major correction. Keep your eye on JPMorgan, Goldman Sachs, and Home Depot in particular to see how they respond to the Federal Reserve's release and the end of earnings season.
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Dan Caplinger owns warrants on JPMorgan Chase. The Motley Fool recommends Goldman Sachs and Home Depot and owns shares of JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.