Wall Street jumps to new session highs after rate cut
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By Justin GrantNEW YORK (Reuters) - Stocks jumped to session highs on Tuesday after the Federal Reserve slashed a key U.S. interest rate by three-quarters of a percentage point, less than many financial market participants had expected.The Fed's action takes the bellwether federal funds rate down to 2.25 percent, the lowest since February 2005. Interest-rate futures before the decision showed investors had almost fully priced in a 1-percentage-point cut in short-term rates.The S&P index of financial shares <.GSPF> was up 4.89 percent following the decision, after trading up 6.4 percent earlier the session.Stronger than-expected results from Goldman Sachs and Lehman Brothers drove up stock prices earlier in the day, along with expectations of a steep rate cut from the Fed."They are going to run out of room here pretty quick. My feeling is that: "Will this stabilize things for a while?' Yes, but that while might only be a few weeks or months, and we could have another shock," said Robert A Weidemer, president of the Business Valuation Center in Reston, Virginia.The Dow Jones industrial average <.DJI> rose 328.09 points, or 2.74 percent, to 12,300.34. The Standard & Poor's 500 Index <.SPX> gained 40.08 points, or 3.15 percent, to 1,316.68. The Nasdaq Composite Index <.IXIC> climbed 71.10 points, or 3.27 percent, to 2,248.08.On Sunday night, the Fed made an emergency quarter-point cut to its discount rate to 3.25 percent and expanded lending from its discount window to include brokerages and investment banks, the first such move since the Great Depression of nearly 80 years ago. Those decisions were announced in conjunction with the Fed's backing of an agreement by JPMorgan Chase &Co. to buy Bear Stearns for a fire-sale price of $2 a share.Before the Fed's decision, all three indexes had gained as much as 2.50 percent to 3.09 percent when they were at what were then the day's highest levels. The Dow was up as much as 310.18 points at its session high of 12,282.43.After the Fed's rate cut was announced, stocks were higher but had trimmed some gains, and then ran back up to set fresh highs for the session.(Additional reporting by Jennifer Ablan; Editing by Jan Paschal)
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