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Wall Street surges, with blue-chip indicator seeing its best day in 5-1/2 years as investors hail central bank decision to cut rates by 3/4 of a percentage point. NEW YORK (CNNMoney.com) -- Stocks jumped Tuesday, with the Dow surging 420 points, its fourth-biggest one-day point gain ever, after the Federal Reserve cut the fed funds rate by three-quarters of a percentage point, surprising investors looking for a larger cut. The Dow Jones industrial average (INDU) rose 420 points, its biggest one-day point gain since July 2002, for a gain of 3.5%. The broader Standard & Poor's 500 (SPX) index added over 54 points, its biggest one-day point gain since Jan. 2001, for a gain of 4.2%. The tech-fueled Nasdaq composite (COMP) advanced over 91 points, its biggest one-day point gain since May 2002, for a gain of around 4.2%. Stocks had rallied ahead of the news as investors welcomed better-than-expected quarterly earnings from Lehman Brothers and Goldman Sachs. But the market stumbled in the minutes after the 2:15 p.m. ET Fed announcement, before recharging in the last hour of trade. The initial setback was likely a knee-jerk reaction because people looking for a bigger cut didn't get it, said Harry Clark, CEO at Clark Capital Management. However, after digesting it, Wall Street was perhaps realizing that 75 basis points was the right decision, Clark said, in that it suggest both that the Fed remains on top of the problems in the economy, but is not so panicked as to need to cut rates by a full percentage point. The Fed also cut the discount rate, which affects bank loans, by three-quarters of a percentage point, leaving it at 2.25%, after announcing an emergency quarter-point cut to that rate this weekend. In the statement accompanying Tuesday's decision, Fed policy makers acknowledged the continued strain in the financial markets, the softer consumer spending environment and labor market, and also talked about higher inflationary pressure.
I think that Fed’s three-quarter percent rate cut today may help stabilize the stock market. Also, better-than-expected earnings from Lehman Brothers and Goldman Sachs help boost the stock market. Without the aggressive rate cut in place, it’s hard to stabilize the credit market. Hopefully, the investors will be more willing to lend and the credit market may be going back to normal soon. And, theU.S.
I think that Fed’s three-quarter percent rate cut today may help stabilize the stock market. Also, better-than-expected earnings from Lehman Brothers and Goldman Sachs help boost the stock market. Without the aggressive rate cut in place, it’s hard to stabilize the credit market. Hopefully, the investors will be more willing to lend and the credit market may be going back to normal soon. And, the
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