Rate-cut euphoria
sends Dow up 117The blue-chip index posts its best
From staff and wire reports
weekly point gain in historyNEW YORK -- Stocks moved higher on Wall Street today, with the Dow industrials adding another 117 points to yesterday's 330-point buying frenzy sparked by an unexpected interest rate cut at the Federal Reserve.
Earlier, stocks rose sharply in Europe and Asia as investors were heartened by the Fed move and resulting gains on Wall Street. The key market indexes in Hong Kong and Singapore both surged about 9 percent, while Tokyo shares rose 2.2 percent to end a three-day slump.
The Dow Jones industrial average rose 117.40, or 1.41 percent, to 8,416.76, bringing its two-day advance to 447.98 and giving the blue chip index a 517.24-point, or 6.5 percent, gain for the week. That's the best weekly point gain for the Dow in its history.
The index of 30 major U.S. companies soared 4.2 percent yesterday to the highest level since before the late August selloff. Most of the 330.58-point advance, the third biggest point-gain in history, came in the final hour of trading after the Fed announced the second cut in lending rates by the U.S. central bank in less than three weeks.
Fed officials, worried that the spread of economic instability overseas has led financial institutions to cut back on lending, cut two key short-term interest rates by a quarter percentage point yesterday.
The cut in both the discount rate and the federal funds rate followed a decision Sept. 29 to lower its target for the federal funds rate, the interest on overnight loans between banks, by one-quarter point. The discount rate is the interest on loans by the Fed to banks.
Major banks followed by reducing the prime rate they charge their best business customers, to 8 percent. A variety of business and consumer loans, including some credit-card balances, are pegged to the prime rate.
In Hawaii, the state's largest financial institution, Bank of Hawaii, and American Savings Bank both said they were cutting their prime rates to 8 percent from 8.25 percent in response to the Fed's move.
"This change will have the effect of lowering borrowing costs for many small businesses and consumers," said Paul Brewbaker, Bank of Hawaii's chief economist.
By late this morning, other local banks had not announced any rate-cut moves. But some noted that they had cut their prime lending rates a quarter point after the last Fed rate cut.
The Fed's aim is to keep businesses, consumers and banks from getting spooked by world turmoil and sharply curtailing lending and spending.
On Wall Street today, advancers beat decliners by a 2-to-1 margin on the New York Stock Exchange, with 2,111 up, 1,016 down and 412 unchanged. NYSE volume totaled 1.021 billion shares, the fifth busiest day ever and up sharply from Thursday's busy pace of 927.36 million,
The S&P 500 gained 8.93 to close at 1,056.42, and the NYSE composite index rose 5.78 to 522.24. The Nasdaq index was up 9.94 to 1,620.95. The small company-dominated American Stock Exchange composite index climbed 5.84 to 604.50 and the Russell 2000 index jumped 8.06 to 342.87.
The price of the Treasury's main 30-year bond was off 3/32 point, or 94 cents per $1,000 in face value, by late afternoon, while its yield rose to 4.97 percent from 4.96 percent late yesterday.
U.S. stocks also got a lift today from expectations that another rate cut may come at the Fed's next policy-making committee meeting in November. Fueling those expectations today was a new Labor Department report that said inflation disappeared in September. A separate Fed report showed production at the nation's factories, mines and utilities fell 0.3 percent in September.
In London, the Financial Times-Stock Exchange 100-share index of leading stocks initially rose 2.6 percent, but trimmed its gains to 1.5 percent. Prices also rallied in Italy and Switzerland. In Germany, the DAX index rose 2 percent in late trading.