Rate cuts buoy market hopes
The outlook for U.S. stock markets improved dramatically Wednesday morning after the Federal Reserve and European central bankers announced a coordinated emergency rate cut.
The Federal Reserve reduced its benchmark discount rate by 0.5 percent to 1.5 percent. The European Central bank reduced its benchmark to 3.75 percent and the Bank of England cut its benchmark to 4.5 percent. Canada, Sweden, and Switzerland also reduced rates. In a joint statement, the central bankers said they were taking the acting because “the recent intensification of the financial crisis has augmented the downside risks to growth.”
Futures on the Standard & Poor’s 500 Index jumped to a 24.10 point gain to 1,029.90 at 7:02 a.m., two minutes after the Fed’s announcement. Dow Jones Industrial Average futures were up 512 points to 9,690 (payday loan).00 and Nasdaq 100 futures were up 27.25 points to 1,364.25.
Prior to the Fed’s announcement, the S&P 500 futures contract had tumbled as much as 43 points on the heels of steep declines overseas. The Nikkei 225 declined more than 9 percent on the Tokyo Stock Exchange as investors fretted about a global recession and the S&P 500 Index below the 1000 level for the first time in five years Tuesday.
European stock markets rebounded swiftly; nearly erasing loses of as much as 5 percent. The FTSE 100 Index was down 20 points, or 0.24 percent, to 4585.11 on the London Stock Exchange at 7:06 a.m.