What happened
Shares of Home Depot (HD -1.65%) were moving lower as the home improvement retail giant got swept up in the broader market sell-off.
An increase in job openings in August and comments from the Federal Reserve chair helped stoke renewed fears of rising interest rates, and 10-year Treasury yields jumped to 16-year-highs to reflect those concerns.
As a result, Home Depot stock was down 3.2% as of 2:31 p.m. ET, while the S&P 500 had given up 1.6% at the same time.
So what
Yields on 10-year Treasury notes were up 2.5% to 4.79%, their highest point in 16 years.
Mortgage rates are closely tied to Treasury yields, as they're based on the Treasury yield plus a certain spread that depends on the market's appetite for mortgage bonds.
With Treasury yields up, mortgage rates were also moving higher. According to Mortgage News Daily, the average rate for a 30-year fixed mortgage rose to 7.72%.
Rising mortgage rates make it harder for prospective homebuyers to buy a new home and are causing people who captured low mortgage rates during the pandemic to stay in their homes, rather than selling and moving.
For Home Depot, that's a problem, because the company's business is closely tied to the housing market. Move-ins tend to be correlated with home improvement, and prospective sellers are also likely to spend money touching up their property so they can get the best price.
Now what
Investors already expected Home Depot's sales and profits to decline this year, as the company said in its guidance.
However, the Fed's update to its forecast last month, which said that interest rates would stay higher for longer, and today's news make it more likely that the headwinds on the business will remain.
While Home Depot is still a rock-solid business and a great stock to own for the long haul, investors are going to have to be patient with its recovery.