Home Depot's 4.5% Plunge: Housing Woes and Earnings Shock Trigger Market Tremors

Summary
• Home Depot (HD) slumps 4.5% to $341.82, marking its worst post-earnings drop since February 2023
• Q3 adjusted EPS of $3.74 misses estimates by $0.10, with full-year guidance slashed to 5% EPS decline
• Sector peers react: Lowe's (LOW) down 1.53% as housing market freeze spreads unease

Home Depot’s stock tumbled nearly 4.5% in early trading after the home improvement giant slashed its full-year profit outlook, citing weak housing demand and consumer uncertainty. The selloff, fueled by a third consecutive earnings miss and a lack of storm-driven sales, sent ripples through the retail sector. With the stock trading near its 52-week low of $326.31, investors are recalibrating expectations for a market segment once seen as a bellwether of economic resilience.

Earnings Miss and Housing Headwinds Spark Panic
Home Depot’s 4.5% intraday drop was triggered by a Q3 earnings report that fell short of expectations on both the top and bottom lines. The company cited a 'lack of storms' as a key factor, which suppressed demand for high-margin categories like roofing materials and generators. CEO Ted Decker explicitly linked the underperformance to 'consumer uncertainty and continued pressure in housing,' noting that the housing market’s stagnation has disproportionately hurt home improvement demand. The revised guidance—now projecting a 5% decline in adjusted EPS versus a prior 2%—underscored the severity of the downturn, with analysts citing a 'deferral mindset' among homeowners delaying large projects due to high mortgage rates and economic anxiety.

Home Improvement Sector Suffers as Housing Market Freezes
The Home Depot’s 4.5% decline mirrored broader sector weakness, with rival Lowe’s (LOW) down 1.53% in sympathy. Both retailers are grappling with the same macroeconomic headwinds: elevated mortgage rates, a stagnant housing market, and consumer caution. The sector’s pain is emblematic of a broader slowdown in discretionary spending, as homeowners defer large-scale renovations. While Home Depot’s professional (Pro) segment remains relatively resilient, the DIY segment—driven by smaller, maintenance-focused projects—has seen weaker engagement, reflecting a shift in consumer priorities.

Bearish Playbook: Puts and Proxies for a Volatile Recovery
• RSI: 23.34 (oversold)
• MACD: -7.37 (bearish divergence)
• 200D MA: $379.36 (price at 341.82, below MA)
• Bollinger Bands: 358.97–394.98 (price near lower band)

Home Depot’s technicals paint a bearish near-term picture, with RSI in oversold territory and MACD signaling downward momentum. The stock is trading near its 52-week low and below key moving averages, suggesting a potential continuation of the selloff. For traders, the focus should be on short-term volatility and defensive positioning. The options chain offers two standout contracts for a bearish scenario: the November 28 put at $340 (HD20251128P340) and the November 28 put at $335 (HD20251128P335).

• HD20251128P340: Put option with 66.47% leverage, 26.75% IV, delta -0.428, theta -0.0496, gamma 0.02467, turnover 315,317
- L: High leverage amplifies returns on a 5% downside
- IV: Mid-range volatility suggests reasonable cost
- D: Moderate delta balances sensitivity and risk
- T: Strong theta decay supports short-term holding
- G: High gamma ensures responsiveness to price swings
- T: High turnover ensures liquidity
- Payoff: $340 strike would yield $340 - $324.71 = $15.29 per share if HD drops 5%
- Why it stands out: This put offers a high leverage ratio and strong gamma, ideal for a sharp decline in a low-volume environment.

• HD20251128P335: Put option with 118.04% leverage, 25.18% IV, delta -0.2987, theta -0.0755, gamma 0.02318, turnover 157,619
- L: Extreme leverage for aggressive downside bets
- IV: Slightly lower volatility reduces cost
- D: Lower delta suits a gradual decline
- T: Higher theta decay supports shorter holding periods
- G: Solid gamma for moderate price swings
- T: High turnover ensures ease of entry/exit
- Payoff: $335 strike would yield $335 - $324.71 = $10.29 per share on a 5% drop
- Why it stands out: The 118% leverage ratio makes this contract ideal for a controlled bearish move, with high liquidity to manage risk.

If $327 breaks, HD20251128P340 offers short-side potential. Aggressive bulls may consider HD20251128C340 into a bounce above $330.

Backtest The Home Depot Stock Performance
I attempted to pull Home Depot’s historical price series so I can identify every date since 2022 when the share price fell at least 5 % in a single session (the first step in creating the event list for your back-test). Unfortunately, the data-retrieval request returned a system error.Before I retry, could you confirm two items for me so I can make sure we’re detecting the right “-5 % intraday plunge” events:1. How would you like the decline measured? • A) Close-to-close drop ≥ 5 % • B) Intraday low vs. previous day’s close drop ≥ 5 % • C) Something else (please specify)2. Are you happy to analyse the period 2022-01-03 through today (2025-11-18), using daily price data, or would you like a different time span or frequency?Once I have these details I’ll re-run the data request and continue with the event back-test.

Housing Market Looms: Watch for $327 Breakdown or Sector Catalyst
Home Depot’s 4.5% drop reflects a market grappling with structural housing challenges and consumer uncertainty. While the stock’s technicals suggest a continuation of the bearish trend, the key inflection point will be a breakdown below the 200-day moving average at $366.98 or a rebound above the 30-day support at $377.67. Investors should monitor the sector leader Lowe’s (LOW) for directional clues, as its 1.53% decline underscores shared vulnerabilities. For now, the focus remains on short-term volatility and defensive positioning. Watch for $327 breakdown or regulatory reaction to Home Depot’s revised guidance.