What happened
Lowe's Companies (LOW 0.63%) was trading slightly higher on Monday, up as much as 2.1% in morning trading just after the opening bell. The home improvement retailer continued to trade in positive territory as the day went on, up about 1% at 2 p.m. ET to $194 per share.
The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite were all up slightly, about 0.1%, as of 1:30 p.m.
So what
There were several factors on Monday that may have impacted Lowe's stock price. One, the National Association of Home Builders/Wells Fargo Housing Market Index was released on Monday, and it fell for the ninth straight month, dropping 3 points to 46. A score above 50 indicates a favorable outlook for home sales, while below 50 represents a negative outlook.
This is not necessarily a bad thing for Lowe's because even if home sales are down, that could mean more people decide to renovate their homes as opposed to selling them. However, rising interest rates might put a damper on that as homeowners may be less inclined to take out loans to do the renovations. And with the Federal Reserve meeting on Tuesday and Wednesday when it will likely raise rates to slow inflation, that becomes more of a factor.
However, there was positive news that overrode those potential negatives as KeyBanc analyst Kenneth Zener upgraded several major homebuilders, including D.R. Horton (DHI -2.53%), Lennar (LEN -1.51%), PulteGroup (PHM -0.50%), Meritage Homes (MTH 0.23%), and TopBuild (BLD -1.41%) to overweight from sector weight. Two others, Toll Brothers (TOL -0.84%) and KB Home (KBH 1.03%), were bumped to sector weight from underweight. The KeyBanc analyst cited positive relative performance, despite rising rates, and an expectation for the housing market to bounce back faster than the broader market. That's a potential positive for Lowe's as it derives sales from homebuilders.
Now what
This should be an interesting week ahead for Lowe's as the Fed meets on Tuesday and Wednesday and is likely to raise rates, so that could obviously be a catalyst. Also, Lennar Corp. and KB Home, two of the stocks KeyBanc upgraded, report earnings on Wednesday, so Lowe's investors should be watching those reports.
In addition, big box retailer Costco (COST -0.24%) reports earnings on Thursday, so that could be a bellwether for other big box retailers.
