Home Depot Stock Leads the Dow Higher

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Following another worse-than-expected economic report, the Dow Jones Industrial Average (DJINDICES: ^DJI  )   is up 25 points to 15,036 as of 1:15 p.m. EDT the Dow, while the S&P 500 (SNPINDEX: ^GSPC  ) is up four points, or 0.23%, to 1,667.

The market has had an interesting dynamic this year in which bad economic news is good news for the market, as it means the Federal Reserve will keep its asset purchases going longer. Last Friday the market finished higher after new-home sales in July came in far below analyst expectations. The worse-than-expected housing-market data lowers the likelihood that the Fed will taper its asset purchases, which is positive for the market. There was one U.S. economic release today, and it was also worse than expected.

Report

Period

Result

Previous

Durable-goods orders

July

(7.3%)

3.9%

Durable-goods orders ex-transportation

July

(0.6%)

0.1%

Durable-goods orders dropped a seasonally adjusted 7.3% in July, falling short of analyst expectations of a 4.9% drop and June's 3.9% rise. The decline was expected, as Boeing's orders dropped from 287 in June to just 90 in July. Excluding the volatile transportation sector, orders were down a seasonally adjusted 0.6%, worse than June's 0.1% rise.

US Durable Goods New Orders Chart

US Durable Goods New Orders data by YCharts.

New orders dropped in various manufacturing sectors, suggesting the economy is not so strong as previously thought. Given the sour data, investors believe the Fed will stick to its quantitative-easing policy longer. Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, has described the "tapering" of QE thus: "The Federal Reserve is not only leaving the punch bowl in place, we're continuing to spike the punch, though at a decreasing rate over the next year."

So what can an investor do in times like this? It's hard to stay sober while everyone around you is drunk on Fed-stimulus punch. My advice: Keep learning, focus on your goals, have an investing plan, stick to it, and ignore the crowds.

It appears some investors are taking the long view on Home Depot (NYSE: HD  ) today. The home improvement retailer's stock is the Dow's leader, up 2.9%. Last week Home Depot was the third-worst Dow stock, finishing down 2% on the worse-than-expected housing-market data. Home Depot is poised to benefit from the housing market's recovery, which some analysts believe is still in the early innings. However, investors in Home Depot are paying a high price to play the trend. Fool contributor Tamara Rutter recently found one under-the-radar stock to benefit from the housing market recovery, which you can read about here

With the American markets reaching new highs, investors and pundits alike are skeptical about future growth. They shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!


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