** Shares of interest-rate sensitive homebuilders pop on Tues as yields keep declining

** The benchmark U.S. 10-year yield US10YT=RR falls to 3.99% as an economic data flurry did little to dissuade investors about the likelihood of an interest rate cut by the Fed next month US/

** S&P 1500 Homebuilding index .SPCOMHOME up 4.5% to about one-month high on Tues with D.R. Horton DHI.N, Lennar LEN.N, PulteGroup PHM.N and Toll Brothers TOL.N each up more than 5%

** PHLX Housing Index .HGX up nearly 4% on the session

** Falling yields can potentially lead to lower mortgage rates, benefitting homebuilders by making homes more affordable

** Still, even if mortgage rates declined further, a sluggish labor market could crimp the housing market

** Meanwhile, home improvement retailers Home Depot HD.N and Lowe's LOW.N are both rising about 4% on Tues, and Builders FirstSource BLDR.N is jumping 7%

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

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