Stocks and exchange traded funds (ETFs) are trading down this morning, but for once it’s not completely related to the impending $700 billion bailout plan. Instead, it’s largely because a key measure of manufacturing in the United States fell sharply.

The Institute for Supply Management’s (ISM) index fell to a reading of 43.5 in September, and it’s the lowest reading since the 40.8 one that came in October 2001, on the heels of the Sept. 11 terrorist attacks, reports Lara Moscrip for CNNMoney. The reading came in sharply below the 49.5 that economists expected.

A reading below 50 indicates contraction.

China, however, had better news in that area: the country’s manufacturing grew for the first time in three months, indicating a robustness for the economy.

To fight four quarters of slowing growth, China has acted quickly. They’ve loosened loan quotas, encouraged small business lending and increased export-tax incentives for garment and textile makers, reports Nipa Piboontanasawat for Bloomberg. Markets in China and Hong Kong are closed for a holiday today.

• iShares FTSE/Xinhua China 25 Index (FXI), down 38.6% year-to-date
• SPDR S&P China (GXC), down 47.5% year-to-date

News from the U.S. housing sector wasn’t much better: mortgage applications fell 23% last week. The failure of financials has led to a credit freeze, making it a challenge for prospective homeowners to get loans, says Aaron Smith for CNNMoney.

Real estate-related ETFs feeling the pinch:

• First Trust S&P REIT (FRI), down 0.7% year-to-date
• iShares Dow Jones U.S. Real Estate Index Fund (IYR), down 2.4% year-to-date
• iShares FTSE NAREIT Real Estate 50 (FTY), down 0.4% year-to-date

Tags: Asia, China, Emerging Markets, Financial, FRI, FTY, FXI, GXC, IYR, Real Estate, REITs, Sector ETFs