The Federal Reserve cutting interest rates has boosted housing shares in the stock market. Small-cap and consumer discretionary shares, as well as homebuilders, stand to benefit from lower rates. The S&P 500 reached record highs after the rate cut, with the Russell 2000 also hitting a record close.

The PHLX Housing index has risen 15% this quarter, with companies like DR Horton and Lowe’s seeing significant gains. Mortgage rates have dropped, with the 30-year fixed-rate mortgage falling to 6.39%. The Fed’s rate cut comes amidst a struggling housing market, with single-family homebuilding hitting a 2-1/2-year low in August.

Investors are hopeful that lower rates will breathe life back into the housing market. However, the impact on mortgage rates may not be as significant due to other factors like the 10-year Treasury yield. The extent of future rate cuts remains uncertain, with inflation levels playing a key role.

Upcoming data will provide more insight into the housing market, including existing and new home sales. Economic data next week will also include GDP updates, manufacturing reports, and inflation gauges, along with remarks from Fed Chair Powell. Volatility is expected around economic data due to differing opinions among Fed members on rate trajectories.

Read more at Yahoo Finance: US housing shares shine as Fed restarts rate cuts