The August jobs report delivered an unpleasant surprise, and a potential gift for housing ETFs.

U.S. nonfarm payrolls increased by just 22,000 last month, far below the 75,000 economists had expected and down sharply from July's 79,000. Revisions to prior months painted an even gloomier picture, with June data cut by 27,000 to reveal the first net job loss since the COVID-19 pandemic. The three-month average for job creation now sits at just 29,000, effectively signaling stagnation.

ITB is surging. Check its live prices.

Markets, however, saw opportunity. The weak labor data cemented expectations that the Federal Reserve will cut interest rates at its Sept. 17 meeting, with futures pricing an 88% probability of a 25-basis-point reduction and an 75.6% chance of an additional cut by late October, according to the CME FedWatch tool. Treasury yields fell, stocks climbed and investors rotated toward sectors poised to benefit from cheaper borrowing costs.

Also Read: Traders Hit The Buy Button On These 10 Stocks After Weak Jobs Report

Homebuilders were among the early winners. Lower mortgage rates often revive demand in a sector that has struggled with affordability pressures and high financing costs.

The iShares U.S. Home Construction ETF (BATS:ITB), heavily weighted toward builders such as D.R. Horton Inc (NYSE:DHI), Lennar Corp (NYSE:LEN) and NVR Inc (NYSE:NVR), gained roughly 2.4% in the hours following the report. The SPDR S&P Homebuilders ETF (NYSE:XHB), which blends homebuilders, suppliers and retailers, rose almost 2%.

Other housing-related funds also moved higher. The Hoya Capital Housing ETF (NYSE:HOMZ), which tracks builders, landlords and service providers, also ticked up more than 2%. The fund holds 15.9% of its portfolio in Home Building Products & Materials companies. Homebuilders such as D.H. Horton, Lennar and NVR are among the 15.3% of the fund’s portfolio.

Cyclicals and precious metals joined the rally, with consumer discretionary ETFs like the Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY) rebounding alongside gold-tracking funds such as SPDR Gold Trust (NYSE:GLD). But the housing trade stands out: a sector beaten down by affordability fears suddenly getting a tailwind from the Fed.

If rate cuts arrive as markets now expect, ETFs such as ITB, XHB and HOMZ could quietly outperform even as broader growth slows.

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