- The Washington Times - Wednesday, December 17, 2008

The stock market soared Tuesday after the Federal Reserve cut a key interest rate to near zero, shunting aside another bout of government reports showing a worsening recession.

All of the major indexes rose more than 4 percent.

At the close, the Dow Jones Industrial Average shot up 359.61, or 4.20 percent, to 8,924.14 after being up about 100 in subdued trading ahead of the Fed’s announcement.

Broader stock indicators also rose. The Standard & Poor’s 500 Index advanced 44.61, or 5.14 percent, to 913.18, and the Nasdaq Composite Index rose 81.55, or 5.41 percent, to 1,589.89.

The Russell 2000 Index of smaller companies rose 30.28, or 6.69 percent, to 482.85.

The markets opened higher in expectation of the Fed’s move but soared after the announcement that lowered the federal funds rate from 1 percent to a range of zero to 0.25 percent in an effort to encourage bank lending and consumer spending. The rate is what banks charge one another for overnight loans.

As it has in past weeks, Wall Street seemed to ignore reports from the Labor and Commerce departments showing a deepening recession, preferring to look ahead at what the Fed might do to turn the economy around.

The Labor Department said consumer prices fell 1.7 percent in November, surpassing the previous record drop of 1 percent set in October. Both declines marked the biggest one-month decrease since February 1947.

The Commerce Department said the construction of new homes plunged by 18.9 percent in November, the biggest drop since March 1984.

New-home starts declined to a seasonally adjusted annual rate of 625,000 from a downwardly revised level of 771,000 in October. Economists had expected the total drop to be 740,000.

Commerce also said applications for building permits dropped by 15.6 percent to 616,000 from an upwardly revised figure of 730,000 in October. Such applications are viewed as a good sign of future activity.

Economists had expected an annual rate of 700,000, according to a survey by Thomson Reuters.

In Europe, the Financial Times Stock 100 index of top British shares, or FTSE, rose 11.64 points, or 0.3 percent, to 4289.20. Germany’s DAX moved up 65.01 points, or 1.4 percent, to 4719.83. France’s CAC-40 increased 21.22 points, or 0.7 percent, to 3206.88.

In Asia, Japan’s Nikkei 225 stock average dropped 96.64 points, or 1.1 percent, to 8568.02. Hong Kong’s Hang Seng Index rose 83.26 points, or 0.6 percent, to 15,130.21.

The number of stocks advancing outnumbered those declining by 5 to 1 on the New York Stock Exchange, where consolidated volume came to 5.81 billion shares, up from 4.37 billion on Monday.

Demand for government bonds surged. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.27 percent from 2.53 percent late Monday. The yield on the 30-year fell to 2.78 percent from 2.99 percent late Monday.

The yield on the three-month T-bill - whose yield has at times gone negative due to frenzied buying - was at 0.02, flat with late Monday.

The dollar was mostly lower against other major currencies, particularly the euro. Gold prices rose.

Light, sweet crude fell 91 cents to settle at $43.60 a barrel on the New York Mercantile Exchange.

Battered financial stocks led the market’s advance. Goldman Sachs Group Inc. reported its first quarterly loss since it went public in 1999, losing $2.29 billion during its fiscal fourth quarter. But investors were apparently relieved that the loss wasn’t wider and sent the stock up $9.54, or 14 percent, to $76.

Other financial names jumped. JPMorgan Chase & Co. rose $3.72, or 13 percent, to $32.35, while Wells Fargo & Co. gained $3.71, or 14 percent, to $29.78.

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