Homebuilders were the best performers of a holiday-shortened week following an emergency rate cut by the Federal Reserve that dropped the fed funds rate to 3.50%.

Amid fears of a recession that spurred panic selling in overseas markets, the Fed announced that it had slashed interest rates by 75 basis points about a week ahead of its next scheduled meeting. Homebuilders jumped on the news as the embattled sector hoped for more government assistance in finding a bottom to its long slide.

The iShares Dow Jones U.S. Home Construction ( ITB) ETF soared 20.7% to $17.99. The SPDR S&P Homebuilders ( XHB) ETF jumped 15.9% to end the week at $19.94.

Financial stocks also rebounded during the week. On Wednesday, New York state insurance regulators met with big banks and brokers to discuss raising capital for embattled bond insurers. The biggest of the group, Ambac Financial ( ABK) and MBIA ( MBI), soared 86% and 65% over the four sessions, respectively.

Meanwhile, E*Trade Financial ( ETFC) rallied 33% for the week after the company said it plans to cut costs in 2008 by $360 million following a fourth-quarter loss of $1.7 billion.

For the week, the Ultra Financial ProShares ( UYG) ETF jumped 17.6% to $36.19. The Financial Select Sector SPDR ( XLF) ETF rose 7.6% to $27.43. The iShares Dow Jones U.S. Broker-Dealers ( IAI) ETF was higher by 7% to $46.59.

On the other hand, a 19.4% drop in shares of Apple ( AAPL) during the week sank technology ETFs. Following Tuesday's closing bell, Apple offered fiscal second-quarter guidance that was below analysts' expectations. The decline came despite a banner first quarter for the iPod, Mac and iPhone maker.

The Ultra Technology ProShares ( ROM) ETF fell 3.8% to $58.67. The Internet Architecture HOLDRs ( IAH) ETF shed 2.2% to $44.33.

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