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Homebuilders Retreat

May's correction hurt housing related stocks more than most other sectors.

The SPDR S&P Homebuilders ETF (XHB) declined over 20% since May 3 before rebounding slightly last week.  The overall market declined 12% in the same time period.

The overall housing market is likely to slow as the June deadline approaches for a Federal Tax Credit designed to stimulate housing.  Some analysts believe that the tax credit pulled forward sales that would have happened later in the year.

The catalyst for the accelerated decline in housing stocks is more likely due to the surprising April permits number which saw the largest decline since December 2008.  Permits are an indicator of future construction.

XHB is an equal-weighted ETF with 27 holdings including home builders, building products companies and home related retailers. Holdings include Home Depot, Owens Corning and Sherwin Williams.

For more investing choices, see the list of industry ETFs.

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