Stocks surged on the Fed's decision cut its fed fund target by 50 basis points and great earnings. The Dow Jones Industrial Average was up 335.97 points (+2.51%), the S&P 500 sprinted up 43.13 points (+2.92%), and the Nasdaq Composite Index finished 70.00 points higher (+2.71%). Volume spiked at the NYSE to 1.6 billion, with advancers bashing decliners 10:1.
It now seems the painful wait was worth it, as Bernanke gave the markets what it was begging for. He lowered both the interest rate target (now 4.75%) and discount rate (now 5.25%) by 50 basis points. Whether this is the beginning of a series of cuts or this was a "one and done" act remains to be seen, but for now, this has to be seen as a positive catalyst for the US economy. Before the announcement, the Labor Department reported wholesale prices dropped 1.4% in August, but the PPI increased by a greater than expected 2.0%. The US 10-year treasury's price dropped 6/32, finishing with a rate of 3.485%.
All sectors were strong with financials (+4.5%), materials (+4.2%), consumer discretionary (+3.3%), industrials (+3.2%) and energy (+3.0%) enjoying big moves. Lehman Bros. (+10.0%) and Best Buy (6.6%) reported better than expected quarters. American Express (+4.6%) moved up on news that it was selling its international banking unit. Crude-oil had another record breaking day, up 94 cents to $81.51.
Tomorrow CPI (8:30 AM), Housing Starts (8:30 AM), and Morgan Stanley's earnings will be reported. Quadruple witching is on Friday, so fair warning if you want to start rolling over those long call or shorts put positions that have September expirations.
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