17 Dec 2008

Stocks soar after Federal Reserve rate cut

11:35 am on 17 December 2008

US stocks rallied after the Federal Reserve slashed borrowing costs to a record low and pledged more unconventional steps to fight the deepest recession in generations.

Banks led the charge higher, spurred both by the Fed's move to cap its target lending rate at 0.25%.

The Dow Jones industrial average rose 359.61 points, or 4.20%, to 8,924.14.

The benchmark Standard & Poor's 500 Index jumped 44.61 points, or 5.14%, to 913.18 - its highest closing level since 10 November.

The Nasdaq Composite Index climbed 81.55 points, or 5.41%, to 1,589.89.

In a unanimous vote, the Fed made a larger-than-expected cut to the the benchmark federal funds rate by at least three-quarters of a percentage point to a target range of zero to 0.25%, down from 1%.

In addition, the central bank said it would take other steps to stimulate lending and economic activity, including large purchases of mortgage securities to help unblock credit.

The Federal Reserve is also looking at the potential benefits of buying longer-term Treasury securities in an effort to bring down other lending rates to stimulate credit and economic growth.

Wall Street icon Goldman Sachs posted a quarterly loss, but it was not deep as many feared. Goldman's stock gained more than 14%, outshining an 11% advance in the S&P 500's financial index.

JPMorgan Chase & Co was the Dow's top performer, up 13% at $US32.35.

Also improving investor sentiment were better-than-expected quarterly earnings from electronics retailer Best Buy, which buoyed technology stocks.

Companies such as Microsoft Corp and Intel, which draw significant revenues from consumer demand for electronic products, were among the Nasdaq's top advancers.