Stock Markets Rally After the Fed rate cut

Stock markets in the U.S. and Europe rallied yesterday after the Federal Reserve unexpectedly cut the discount rate to ease a credit crunch. The Standard & Poor's 500 Index rose 34.67, or 2.5 percent, to close at 1,445.94, while the Dow Jones Industrial Average increased 233.3, or 1.8 percent, to 13,079.08.

When the Fed announced the rate reduction at 8:15 a.m. New York time, S&P 500 futures soared 3.6 percent in 46 seconds. Within 15 minutes, Europe's Dow Jones Stoxx 600 Index was up 2.4 percent. Credit-default swaps on the CDX North America Investment-Grade Index dropped 6 basis points to 72 basis points as the perception of U.S. corporate-bond risk declined. Three-month U.S. Treasury bill yields rose because the need for government debt as a safe haven diminished, and the dollar fell against the euro for the first time in a week.

Stock Markets Rally After the Fed rate cut, Bloomberg
8/18/2007 8:50:28 AM