If you were just going by the performance of certain exchange traded funds (ETFs) in intraday trading, you wouldn’t think some bad news about the housing and retail sectors had just come out.

First, wholesale prices rose again last month, by 0.3%. Outside of food and energy, prices rose at their fastest pace in 15 months with the rise in inflation at a "troubling" 0.5%.

The inflation numbers are a signal that the soaring energy costs are starting to affect other areas of the economy. Prescription drug prices rose by 1.3%, and cars and light trucks didn’t get any cheaper, says Martin Crutsinger for the Associated Press.

Certain retail and consumer-spending ETFs were up between 2% and 3% in intraday trading. Perhaps the funds are reflecting the overall optimism in the market ahead of the Federal Reserve’s rate cut late this morning.

• Retail HOLDRs (RTH), down 7.7% year-to-date
• SPDR S&P Retail (XRT), down 11.1% year-to-date
• Consumer Discretionary SPDR (XLY), down 9.4% year-to-date
• iShares Dow Jones US Consumer Goods (IYK), down 8.9% year-to-date

The news wasn’t much better for the homebuilding sector: new home construction fell by 0.6% . Wall Street had predicted a 0.2% decline. Building permits, considered an indicator of future activity, fell by 7.8% to its slowest pace in 16 years.  The homebuilders ETFs were up nearly 9% intraday.

• iShares Dow Jones US Home Construction (ITB), down 2.9% year-to-date 
• SPDR S&P Homebuilders (XHB), up 0.2% year-to-date

Tags: Federal Reserve, Homebuilders, Real Estate, Retail & Consumer, XRT

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