The SPDR S&P Homebuilders ETF (XHB) dropped more than 4.5 percent in Friday trade, underperforming the S&P 500's roughly 2 percent decline on the day, as the latest Fed commentary increased expectations the central bank could raise rates as early as September.
It was the ETF's worst day since June 20, 2013, when it lost 4.81 percent. It was also the ETF's worst week since Jan. 8.
On Friday, Boston Federal Reserve President Eric Rosengren said low interest rates are increasing the chance of overheating the U.S. economy. Investors are also looking ahead to Governor Lael Brainard's speech scheduled for Monday at The Chicago Council on Global Affairs, which was previously unannounced.
An increase in the federal funds rate would result in a higher fixed-mortgage rate, potentially discouraging home buyers.
XHB 2016 Chart
Some of the greatest decliners in the ETF included Installed Building Products and LGI Homes, down more than 7 percent each, and USG and Williams-Sonoma, each at least 6 percent lower on the day.