Builders FirstSource Stock and D.R. Horton Are Rising. Thank the Downbeat Jobs Report.

The U.S. jobs report for August sent bond yields lower and raised expectations for rate cuts. (Photograph by Daniel Acker/Bloomberg)

Shares of home builders and suppliers were rising Friday following a lackluster U.S. jobs report for August that sent bond yields lower and raised expectations for rate cuts by the Federal Reserve.

The U.S. added 22,000 jobs in August, well below the 76,500 economists had expected, and the unemployment rate ticked up to 4.3% from 4.2% in July.

In turn, Wall Street’s bets on a rate cut in September rose to 100% from 96.4%, and the share of a half-point cut rose to 14.3% from zero, according to CME FedWatch. Traders now see a 64.4% chance of three quarter-point cuts before the end of the year, up from 45.8%.

Bond yields retreated, with the 10-year Treasury yield down 0.085 percentage points.

The combination should mean falling mortgage rates for home buyers and lower borrowing costs for developers—good news for builders and building-supply companies. Standard fixed-rate mortgages tend to move with the 10-year Treasury yield, not directly with the Fed’s cuts, as Barron’s reported last month.

Among suppliers, Builders FirstSource was climbing 2.3% on Friday, Trex shares were up 2.9%, and flooring company Mohawk Industries jumped 2.2%. The broader market wasn’t faring as well, with the S&P 500 declining 0.7%.

Home builders themselves also were on the rise, with investors perhaps expecting an uptick in demand as rates decline. D.R. Horton stock was up 2.2%, while Lennar climbed 2.6%.

Shares of home builders have struggled over the last year, with the housing market remains frozen by high costs and low supply. The SPDR S&P Homebuilders exchange-traded fund, which was climbing 1.2% Friday, entered the day up 4.5% over the last 12 months, while the S&P 500 has soared 19%.

Write to Nate Wolf at nate.wolf@barrons.com