Shares in household appliance maker Whirlpool (WHR 6.16%) have risen by 6.5% as of midday today. The move comes after a high-profile speech by Federal Reserve Chair Jerome Powell gave support to the idea that a rate cut is coming. Discussing the inflation outlook, Powell noted that "with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance."
Why it matters to Whirlpool
Lower interest rates could have a significant impact on Whirlpool for three interconnected reasons. First, they would likely improve the housing market by making it more affordable, and that's likely to feed through into more appliance sales.
Second, they would have an inordinate impact on Whirlpool's higher-margin discretionary (as opposed to replacement) demand, whereby consumers are likely to buy newer models or planned kitchens. Third, lower interest rates would make refinancing Whirlpool's debt easier.
For these reasons, the market usually rewards the stock when the interest rate environment looks more benign.
A stock to buy?
Whirlpool is an attractive stock, but the case for it doesn't rest only on lower interest rates; the underlying case is also based on an improvement in its competitive positioning as a result of President Trump's tariff actions. Lower interest rates will certainly help, but there's no guarantee a rate cut is coming in September or that a Federal Reserve rate cut will lead to a drop in market rates, including mortgage rates, particularly if inflation data isn't complying.
Image source: Getty Images.
So today's move isn't too much to get excited about, and it may well retract. Still, Whirlpool's long-term growth prospects make it a stock well worth looking at.
