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NEW YORK -- The Dow Jones average and the Nasdaq shot up more than 300 points each today after the Federal Reserve unexpectedly lowered interest rates by a half-percentage point. Fed lights fire
under Wall St.The Nasdaq rockets 325 and
jumps 14.2% while the Dow soars
300 after rates are cut a half pointStar-Bulletin news services
It was the best one-day gain ever for the Nasdaq composite index, which is loaded with technology stocks that have been severely battered in recent months.
The rate cut, the first really good news in months for the market, was larger and sooner than anticipated. It also was the Fed's first rate reduction in two years.
"The markets needed this, but this was totally unexpected," said Barry Hyman, chief investment strategist for Weatherly Securities. "The swiftness and the size clearly indicates the Fed is concerned about the economy. It is a catalyst and it is a catalyst that is going to stick."
"The important thing to believe is the Fed is on a scheme of lower interest rates for the first half of this year."
After the Fed's announcement at about 1:15 p.m. EST, the Dow, which had been modestly lower, soared nearly 380 points in about 15 minutes. The blue chips maintained much of that gain, finishing up 299.60, or 2.8 percent, at 10,945.75.
The Nasdaq, which lost 7 percent of its value yesterday, jumped 324.83, or 14.2 percent, to close at 2,616.69. The surge gave the index its biggest one-day point and percentage gains ever.
The Standard & Poor's 500 index climbed 64.29, or 5 percent, to 1,347.56.
Today's session also was a record-setter in terms of volume, which surpassed 1.87 billion shares on the New York Stock Exchange, a more than 60 percent increase over yesterday's 1.1 billion. Advancing issues outnumbered decliners a nearly 3-to-1 on the NYSE, with 2,296 up, 780 down and 248 unchanged. All 25 of the most active U.S. stocks advanced. About 3.01 billion changed hands on the Nasdaq market.
The Russell 2000 index, which measures the performance of smaller companies, gained 21.90 at 484.39. The NYSE composite index rose 17.32 to 659.07; but the American Stock Exchange composite index slipped 0.42 to 882.51.
Treasury bond prices, meanwhile, tumbled. The 10-year note had its biggest fall in 20 months, after the Fed's move prompted investors to sell fixed-income securities and buy stocks. The 10-year Treasury note fell nearly 2 points, or almost $20 per $1,000 face amount, its biggest one-day decline since May 14, 1999. The yield rose to 5.16 percent from 4.91 percent late Tuesday. Prices and yields move in opposite directions. The 30-year bonds sank 2 1/2 points and yielded 5.50 percent, up from 5.34 percent late yesterday.
The Fed's rate cut immediately reversed the mood on Wall Street, which had begun 2001 continuing the selling momentum that made 2000 the worst year ever for the Nasdaq and the worst in nearly two decades for the Dow.
"The market will quickly turn from being excessively negative to optimism," Hyman said. "So much of this market has been negative with people saying, "I don't ever want to own a tech stock again.'"
Investors eagerly bought up discounted tech stocks after the Fed lowered interest rates well ahead of its Jan. 31 meeting and by double the quarter point analysts were expecting.
Personal computer makers rose sharply after trending down for months amid slumping demand. Dell advanced $2.50 to close at $20, and IBM, a Dow industrial, was boosted $9.81 to $94.63.