For the past few weeks the stock market has been nervously watching the Federal Reserve and particularly Fed Chairman Ben Bernanke for hints of where interest rates are headed. On Wednesday this week, Bernanke made some comments that were interpreted as meaning that rates might not rise as fast as most feared. Home building stocks, as tracked by the S&P Home Builders Index, rose 3.6% in a day. A longer view going back to January, 2000 is shown on the chart. This looks at interest rates measured by 10 year treasury notes (green line, right scale which is inverted), the S&P Home Builders Index (blue line) and the S&P/Case-Shiller 20 City Home Price Index (green line). Home builder stocks react much more, and a bit sooner, than do home prices. The stocks peaked in 2005, before home prices and the peak to trough move, an 83% deep dive, was far greater than the drop seen in home prices. In some sense, the action was in the stock market, not the housing market.