U.S. Stocks Trim Rally In Aftermath Of Fed Rate Cut
NEW YORK (MarketWatch) -- U.S. stocks on Tuesday tempered a nearly daylong rally after the Federal Reserve cut a key interest rate by three-quarters of one percentage point, falling short of some market expectations.
"This is a non-event in terms of what the market was expecting and in its impact on the economy; the fed funds rate is their least effective tool in helping the economy. In an overleveraged system, it doesn't matter what the cost of money is when you're de-leveraging," said Peter Boockvar, equity strategist at Miller Tabak.
"It is notable that the Fed is finally beginning to respond to headline inflation with two members dissenting -- if it were up to [Fed Chairman Ben] Bernanke, they would cut to zero, but now there are people pushing back a little bit."
Up nearly 300 points before the Fed announcement , the Dow Jones Industrial Average trimmed its advance, recently up 174.22 points to 12,146.47.
Blue-chip financials remained higher, with Citigroup Inc. recently up 8.2%, while J.P. Morgan Chase & Co. rose 5.4%.
Other standouts included General Motors Corp. , up 3.6%, and pharmaceutical conglomerate Merck & Co. , recently ahead 1.1%.
Off the Dow, shares of Goldman Sachs Group and Lehman Brothers Holdings Inc. both gained, with Goldman rising 11.7% and Lehman leaping 32.6%. The large investment firms reported before the market open that their respective profits fell less than analysts had forecast.
Shares of Bear Stearns Cos. advanced 30.8% after some shareholders said that they would vote against a fire-sale deal to sell the company to rival J.P. Morgan for $2 a share. .
Another Dow component, Exxon Mobil Corp. , added 1% as crude futures gained ground after Monday's slide, with the spot month for crude recently up $3.42 to $109.10 a barrel on the New York Mercantile Exchange.
The S&P 500 Index climbed 27.09 points to 1,303.69, while the technology-laden Nasdaq Composite Index gained 30.50 points to 2,207.51.
Helping support the tech sector, shares of Yahoo Inc. were up 4.4% after the online giant reaffirmed its belief that future growth is ahead and that Microsoft Corp. is grossly underestimating the company in offering to buy it for $31 a share. .
Volume on the New York Stock Exchange surpassed 1.2 billion shares, and for every stock on the decline five were on the rise. On the Nasdaq, 733 million shares were exchanged and advancing stocks outran those declining 2 to 1.
Economic data ahead of the opening bell pointed to further escalation in wholesale prices, which climbed 0.3% in February after a 1% rise the month before. .
A separate report pointed to a bigger than anticipated decline in new-home construction, offering another glimpse into the embattled housing sector. .
By Kate Gibson