The market put together a nice rally after the Fed announced it would cut rates 25 basis points Wednesday.The Dow Jones Industrial Average jumped 137.54 points (+1.00%), Standard & Poor's 500 index gained 18.36 points (+1.20%), and the Nasdaq soared 42.41 points higher (+1.51%). Volume on the NYSE was heavy at 1.6 billion shares, and advancers beat decliners by a ratio of about 3:1.
The Fed's move was expected, so a lot of importance fell on the statement (full story). The Fed believed that "the upside risks to inflation roughly balance the downside risks to growth," and also added "recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation." Though no one can be certain of what exactly those words meant, it seemed like the Fed was taking a more neutral stance on the economy. Though this may mean it will take a downturn for the Fed to move rates again, it does also prove to investors that the Fed is not overly worried that the housing slump and credit problems will cause the rest of the market to slip up dramatically. The markets also got a boost in the morning, when the Commerce Department announced GDP increased by the annualized rate of 3.9% (full story) last quarter. The figure was much better than economists expected.
All sectors finished up, with basic materials (+2.5%), energy (+3.0%), and tech (+1.74%) leading the pack. The energy sector got a solid boost from crude, which rallied $4.15 to $94.53/barrel off a surprising drop in inventories (full story). Kraft (+2.5%) reported a drop in profits, but was able to beat estimates (full story). Google (+1.8%) broke the $700 barrier less than twenty sessions after in breached $600 for the first time. The company was up on buzz from Google phone possibilities and plans to take on Facebook with a social networking site (full story).
The market will barely have any time to stabilize as Jobless Claims (8:30 AM), Personal Income (8:30 AM), ISM Manufacturing (10:00 AM) and Pending Home Sales Index figures (10:00 AM) are all scheduled to be released Thursday.
Commentary: Fed Statement Puts Inflation Back On The Table • Housing Prices Projected to Fall Through End of Decade
Stocks to watch: KFT, GOOG