** Shares of interest-rate sensitive homebuilders climb on Fri as rate-cut hopes increase

** Odds that the Fed cuts interest rates by 25 basis points at its next meeting in Dec jump to about 75%, up from 39% on Thurs, according to the CME's FedWatch Tool

** S&P 1500 Homebuilding index .SPCOMHOME up 5.4%, tracking its steepest one-day advance in four months: Biggest boosts include D.R. Horton DHI.N up 6%, Lennar LEN.N 5% and Pultegroup PHM.N 5%

** The benchmark U.S. 10-year yield US10YT=RR drops to around 4.08% amid stock market volatility and dovish comments from New York Fed President John Williams US/

** Declining yields can potentially lead to reduced mortgage rates, which could benefit homebuilders by making homes more affordable to consumers

** PHLX Housing Index .HGX up 4% on Fri

** Also, home improvement retailers Home Depot HD.N and Lowe's LOW.N up 3% and 2%, respectively, on the session, while Builders FirstSource BLDR.N up >5%

(Lance Tupper is a Reuters market analyst. The views expressed are his own)

((lance.tupper@tr.com 1-646-279-6380))