The Federal Reserve cut the target on a key short-term interest rate by a half of a percentage point Tuesday to 4.75%, further acknowledgment from the central bank that the mortgage meltdown plaguing Wall Street and Main Street could have a negative impact on the economy.
Stocks surged following the announcement, with the Dow gaining nearly 250 points, or 1.8 percent. The S&P 500 and Nasdaq both shot up more than 2 percent. Bonds fell, sending the yield on the benchmark 10-year U.S. Treasury up to 4.5 percent.
Most people where planning for a .25% or 0% change, a .5% cut is a big move for this rate. Stocks shot up on the news, while the dollar dropped.
Jay