Stocks Rally As Federal Reserve Cuts Rates To Historic Lows

The Federal Reserve made history today, cutting the overnight lending rate between banks to a range of 0% and 0.25%. This important pledge of support helped spark markets to huge increases as investors took well to the news.  The actual rate had been hovering in this range for a while even though it was not the official target, but this rate cut reinforced the Feds commitment to stopping the financial crisis from getting worse.  The Dow Jones Industrial Average (^DJI) rose 4.2% and closed Tuesday’s trading session with 8,924 points. The Nasdaq (^IXIC) was up by 5.41%, and finished 1,589 points. The S&P 500 (^GSPC) gained 5.14%, and finished with 913 points. Japan’s Nikkei 225 fell 1.12%, wile Britain’s FTSE 100 went up 0.74% in overseas activity.

The federal funds rate was at 1%, and analysts had expected a smaller cut to be announced. This now marks the lowest level for the rate in history. Along with the rate cut, the Fed said it pledges to use “all available tools” in order to bring the economy out of its current slowdown.

The yield for the three month T-bill stayed at 0.02%, while the 10-year Treasury note fell to 2.28%
A day before the OPEC meeting in Algeria, Oil prices were higher rising $1.05 and settling at $45.56. Output is expected to be cut by 2 million barrels during tomorrow’s meeting. In other NYMEX trading, gasoline and heating oil futures rose to $1.04 and $1.47 respectively. Natural gas prices settled at $5.82. The price of gold closed at $857 at the end of Tuesday.

Adobe Systems Inc. (ADBE) reported earnings per share of $0.46 and made a profit of $245.9 million. Adobe had announced a work force cut of 8% earlier this month.

Electronic Retailer Best Buy Co. (BBY) saw share prices rise by double digits after reporting earnings of $0.35, beating analyst estimates significantly.

General Electric Co. (GE) said it plans on hitting its 2008 earnings outlook between $1.78 and $1.84. They also have decided to suspend reporting an earnings forecast for 2009.

Disclosure: None.

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