Lowe’s, Home Depot Gain on Speculation That Fed Won’t Lift Rates

(Bloomberg) -- Shares of Lowe's Cos. and Home Depot Inc. rose on Wednesday, fueled by optimism that the Federal Reserve won't raise interest rates and endanger the U.S. home-improvement boom.

Lowe's climbed as much as 2.5 percent to $67.27, while Home Depot increased 1.2 percent to $121.29. Lowe's had been down 14 percent this year through Tuesday, while Home Depot lost 9.3 percent -- hurt in part by concerns about rates rising.

Traders now only see a 15 percent chance that U.S. central bankers will raise their main interest rate in November, based on futures pricing. Recent jobs data and uncertainties surrounding the U.S. presidential election next week may have made a rate hike less likely.

Home Depot and Lowe's, the two largest U.S. home-improvement chains, have benefited from years of a thriving housing market, with low interest rates providing a boost. A hike might deter some buyers from purchasing new homes or refinancing their mortgages and putting money into repairs.

“Over the past few months, we believe markets have become increasingly wary of rate hikes ending the housing cycle -- and this has a follow-on valuation impact for home-improvement retailers,” said David A. Schick, an analyst at Consumer Edge Research LLC. With interest rates and oil prices remaining relatively low, concerns may be abating, he said.

The Fed will release its rate decision at 2 p.m. Eastern time on Wednesday.

--With assistance from Jeanna Smialek To contact the reporter on this story: Sarah Very in New York at svery@bloomberg.net. To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Kevin Orland