Reaction mixed to Fed rate cut

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By Sean Lengell

Wall Street trading was mixed Wednesday, one day after the Dow Jones Industrial Average skyrocketed to its second-largest point gain.

The Dow bumped up in afternoon trading after the Federal Reserve's announcement that it was cutting a key lending rate a half-point but lost all of its gains for the day in the final half-hour, after hurtling ahead nearly 900 points Tuesday.

The Dow fell 74.16 points, 0.82 percent, to 8,990.96 at the market close, while the Nasdaq Composite Index edged up 7.74 points, 0.47 percent, to 1,657.21. The broad-market Standard & Poor's 500 Index fell 10.42 points, 1.11 percent, to 930.09.

On the New York Stock Exchange, 1,954 stocks advanced and 1,145 declined on a volume of 8.52 billion shares traded.

Meanwhile, the Treasury Department says it has made the first payments from the $700 billion rescue fund that Congress approved earlier this month -- a total of $125 billion in stock purchases from nine major financial institutions.

The program is designed to pump money into the nation's banks to loosen the credit crunch and stabilized the faltering economy.

The Fed's new 1 percent rate matched the most recent lows of 2003 and 2004.

Low interest rates were blamed for spurring the housing bust of the past year. But analysts say an interest rate cut is necessary to stem the current financial crisis.

Some analysts speculate that the precarious state of Wall Street and the economy may lead to further interest rate cuts. But a decision on future cuts likely would be put off until the effects of Wednesday's cuts are felt.

World stocks jumped Wednesday ahead of the Fed's announcement to cut the interest rate.

In the Asia and the Pacific rim, Tokyo shares rose 7.74 percent and Hong Kong finished 0.8 percent higher. The Sydney market also rose 1.3 percent, while - Bombay was up 0.4 percent

In Europe, markets soared Wednesday, with some exchanges showing gains of more than 9.0 percent. The FTSE 100 index rose 8.05 percent to 4,242.54 points while in Paris the CAC gained 9.23 percent to 3,402.57 points.

New orders for durable goods posted an unexpectedly strong showing in September -- the largest gain in three months.

The Commerce Department reported Wednesday that orders for durable goods -- products expected to last at least three years -- increased to 0.8 percent to $207.8 billion.

The surge was lead by a demand for airplanes and autos, government data showed Wednesday.

The increase surprised many economists who had expected a decline. Orders had fallen by 5.5 percent in August, which was the biggest setback in nearly two years.

The big increase in orders for motor vehicles probably reflected the use of incentive packages by automakers trying to spur lagging demand during a generally dismal sales year. Orders for motor vehicles and parts had fallen by a sharp 8.8 percent in August.