The Standard & Poor's 500 Index surged after Lehman and Goldman Sachs Group Inc. reported more profit than analysts estimated. The world's reserve currency jumped to 99.75 yen at 4:41 p.m. in New York. Two-year Treasury notes declined, pushing their yield higher by the most since 2001, after the Fed lowered its target rate for overnight lending between banks by a smaller- than-expected 0.75 percentage point.
The central bank is trying to restore confidence in the financial markets by slashing rates at the most aggressive pace in two decades and injecting cash into the banking system. The credit freeze sparked by the subprime-mortgage market's collapse pushed the S&P 500 to within 0.4 percentage point of a bear market yesterday, sent the dollar to an all-time low against the euro and prompted investors to seek safety in government debt.
The S&P 500 rose 4.2 percent to 1,330.74 today and financial shares in the index jumped the most since 2000 after the earnings at Lehman and Goldman assuaged concern that Wall Street firms were overvalued.
The Fed cut its benchmark rate to 2.25 percent today, the lowest in more than three years. It was the sixth reduction, and follows eight cuts in the discount rate for direct loans to banks since the middle of August, when the collapse of subprime mortgages started to infect markets around the world.