Wall Street soars after Fed's discount rate cut
Stocks surged on Friday to end a turbulent week after the Federal Reserve cut the discount rate it charges banks in an emergency move to stabilise credit markets.business Updated: Aug 18, 2007 06:22 IST
Stocks surged on Friday to end a turbulent week after the Federal Reserve cut the discount rate it charges banks in an emergency move to stabilise credit markets and keep the economy on track.
World stock markets have fallen sharply, with investors fleeing riskier assets as problems in US subprime mortgage lending spread rapidly in other credit markets .
Friday's rally gave the S&P its best day in almost four-and-a-half years. Shares of banks and brokerages, beaten down in the recent turmoil, led the rally and the S&P financial index climbed 3.6 per cent. JPMorgan Chase shares rose 3.4 per cent and Citigroup gained 2.7 per cent, pulling the sector higher.
Energy shares, led by a 4.3 per cent rise in Exxon, helped fuel the rally as the Fed's surprising discount rate cut relieved some concerns about a possible economic slowdown that would crimp the demand for oil. The threat of Hurricane Dean, which is heading toward oil rigs in the Gulf of Mexico, also pushed up the price of oil.
"Stocks are up decently, indicating some of the worst fears of a liquidity crisis are being alleviated," said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey.
"But I don't think this is the end. We'll likely see some more bouts of fear and volatility in the coming weeks."
The Dow Jones industrial average jumped 233.30 points, or 1.82 per cent, to 13,079.08 -- snapping a six-day streak of losses. It was the first time the Dow had been down for six days in a row since October 2006.
The Standard & Poor's 500 Index shot up 34.67 points, or 2.46 per cent, to 1,445.94. The Nasdaq Composite Index soared 53.96 points, or 2.20 per cent, to 2,505.03.
The Nasdaq had its best day in a year, led higher by gains in Apple and Research in Motion.