Friday was a poor end to an up-and-down week on Wall Street. Investors didn't seem comfortable heading into the height of holiday season with uncertainties about the COVID-19 pandemic, monetary policy, and the broader global economy on their minds. As a result, the Dow Jones Industrial Average (^DJI -0.04%) and the S&P 500 (^GSPC -0.00%) posted substantial losses, while the Nasdaq Composite (^IXIC -0.27%) managed to finish close to unchanged.


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Data source: Yahoo! Finance.

With many people watching the Dow, it's natural to wonder why the benchmark lost so much ground. A couple of stocks were responsible for an outsized portion of the Dow's declines. Below, we'll look more closely at Goldman Sachs (GS 0.66%) and Home Depot (HD 1.22%), focusing on their role in sending the Dow lower on Friday.

Goldman takes another hit

Goldman Sachs was down about 4% on Friday. That was enough to make it the worst percentage loser in the Dow, and the fact that its share price is so high meant that it had a massive impact on the average, costing it more than 100 points.

Person at a bank teller window.

Image source: Getty Images.

Goldman has seen an unusual amount of volatility for a financial institution lately, but a good part of those moves come from the tense environment surrounding interest rates. Throughout the latter half of the week, investors have tried to figure out the impact that a faster tapering of bond purchase activity in pursuit of the Federal Reserve's quantitative easing policies would have on short-term and long-term bond rates. For a while, it appeared that higher rates sooner would lead to wider net interest margins that would benefit Goldman's banking business. However, on Friday, long-term rates actually moved lower, leading to a flatter yield curve that could hurt Goldman's bottom line.

That said, there's no dispute about the quality of Goldman's business. With its move into consumer banking, Goldman has diversified its exposure to the financial industry and stands to benefit from economic expansion. Nevertheless, as long as the interest rate picture remains cloudy, shareholders can expect to see continued volatility from the bank stock.

Home (Depot) is where the heart is

Home Depot shares were down a more modest 3% on Friday. Still, that was enough to cost the Dow more than 80 points as a result of the home improvement retailer's high share price.

From a longer-term perspective, Home Depot has been performing exceptionally well. Even when other retailers were taking hits during the worst of the pandemic, Home Depot benefited from people being stuck at home and taking steps to try to upgrade their standard of living. The need to build in remote work capabilities was also a factor in driving greater sales. For its part, the home improvement retailer did a good job of meeting customer needs with services like product pickup and delivery, with a strong e-commerce platform to support its store network.

Looking ahead, there's some concern that Home Depot's stock may have risen too quickly. However, with a solid dividend, an exceedingly strong balance sheet, and financial results that continue to impress, it's hard to see any pullback in shares as anything but a buying opportunity for those with a long time horizon.