On Wall Street, stock prices surged on Tuesday after the U.S. central bank reduced interest rates to the lowest level in history.
The Dow Jones index jumped 359 points or 4.20 percent, to 8,924 points, while the S&P 500 index rose 5.14 percent, to 913 points, the highest level since November 11. The Nasdaq index gained 5.4 percent, reaching 1,589 points. The Fed yesterday cut the key interest rate by at least 0.75 percentage points, bringing it down to a range of zero to 0.25 percent, a level never recorded before. Analysts had expected a rate cut of 0.50 percentage points, to 0.50 percent, and were surprised that the Fed did not lower the fixed-rate interest, as had been customary until now.
Additionally, the Fed announced that it would use all available resources to stimulate economic growth and maintain price stability. Following the Fed’s move, there was a strong increase in stock prices in the financial sector, with the S&P index for that sector jumping 11 percent. Among the biggest gainers, with an increase of over 14 percent, was Goldman Sachs stock, as the investment bank reported a smaller quarterly loss than analysts had feared.
As the Fed also announced further purchases of mortgage-backed securities, which could stimulate lending and home buying, stock prices in the construction sector also rose sharply. The Dow Jones index for the housing sector jumped 11.2 percent, even though it was reported yesterday that the number of housing starts in November fell to record low levels. European stock markets also saw price increases on Tuesday. The London FTSE index rose 0.7 percent, to 4,309 points, while the DAX index of the Frankfurt Stock Exchange jumped 1.6 percent, to 4,729 points. (H)
