Diamonds and Dogs

2/23/16

Home Depot (HD) is riding the housing wave. Home Depot is higher by 2% thanks to strong quarterly results due to a strong housing market and warmer than usual weather. Both helped lift the home-improvement's sales sharply, ending 2015 on a high note as Home Depot gears for another strong year. A mild winter – with the warmest December recorded in 121 years – helped boost sales for roofing products, outdoor garden items, lumber, siding and fencing. Americans and professional contractors were more willing to get outside the spruce up homes due to the unseasonably warm weather. Home Depot says favorable weather added $100 million in additional sales for December – though sales for the entire quarter swelled by $1.8 billion.

Another bad day for the banks. Goldman Sachs is one of many dogs in the banking sector. The stock is down 2.6% and down 20% year to date due in part to concerns of bad loans tin the energy sector. Goldman Sachs admitted yesterday that 40 percent of its loans and lending commitments to oil and gas companies are to junk-rated firms. Goldman Sachs has $1.5 billion in loans to energy companies rated below investment grade and $2.7 billion in unfunded commitments. The total exposure jumps $1.9 billion counting derivatives and other receivables. Not all these loans will go into default and even if they do, it's still a small percent of the whole business at Goldman, but investors right now are shying away from the banks.