Stocks Surge on News Of Rate Cut by the Fed
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
Stocks rocketed yesterday as the Federal Reserve slashed its key interest rate and two brokerage companies posted better-than-expected earnings.
The Dow Jones industrial average soared 420.41 points, or 3.5 percent, to 12,392.66 — the second time in the last week it has gained more than 400 points in one session.
The Dow initially jumped more than 300 points on anticipation that the Fed would cut its benchmark by a full percentage point, pulled back after the central bank announced a reduction of three-quarters of a point, then soared again.
The Standard & Poor’s 500 index shot up 54.14 points, or 4.2%, to 1,330.74. The Nasdaq composite jumped 91.25 points, or 4.2%, to 2,268.26.
Profits fell at Lehman Bros. Holdings and Goldman Sachs Group, but investors breathed a collective sigh of relief that the results weren’t worse and sent shares of both companies up. A day after leading the market lower, other financial stocks also rebounded.
Lehman’s stock jumped $14.74, or 46%, to $46.49 after being pounded for the last two days on worries that the bond-trading firm could face the type of credit squeeze that forced Bear Stearns Cos. into the arms of JPMorgan Chase & Co. Lehman’s first-quarter earnings fell 57% and its revenue dipped 31%, but both were higher than estimates.
Goldman’s earnings fell by more than half as the company recorded $2 billion in write-downs caused by losses in mortgage securities and other credit areas. Nevertheless, Goldman easily beat analysts’ estimates and its stock rose $24.57, or 16%, to $175.59.
Other financials jumped as bargain hunters tried to take advantage of the recent panic-driven sell-off and short sellers, who profit from falling stocks, unwound their bets when the market started rising.
Powerful as yesterday’s rally was, it returned the Dow just to its level of three weeks ago. That’s a measure of the wild volatility that has marked trading in recent weeks, as investors have alternated between hope that the stresses in the financial system were easing, and fear that things might be getting worse.
