Stocks rocket ahead on rate cuts

Dow had a nice 100+ gain prior to rate cut, but then popped another 200 after the announcement when the Federal Reserve said it would cut lending rates to as low as zero to promote growth & price stability. I hope they know how to spell INFLATION! Low interest rates will encourage an even larger stimulus package (government spending) next year.

•Fed Cuts Target Rate to as Low as Zero, Signals Asset Buying as Next Step


The Dow ended with a gain of 359 (bringing it close to 9K, 8924, an important psychological ceiling), advancers ahead of decliners 5-1 & NAZ rose 81. Banks benefit from low interest rates, the S&P 500 FINANCIALS INDEX had a very nice day, up 17 (almost 50 points above its recent depressed low):

Value 172.53

Change 17.44

% Change 11.2%

The Alerian MLP Index went up a modest 3 to 180 (maybe held back by the outcome of expected production cut announcement tomorrow), the Dow Jones REIT Index had an extremely nice gain of 19, the Lehman High Yield Bond ETF (JNK) gained pennies for a 1½% gain (swell!) & the VIX (Volatility Index) dropped 4 to 52½ (remaining in astronomical territory). Oil however was down pennies on uncertainty.


Car makers are running out of time while they wait for help from the administration. The White House is putting together a package to keep the Big 3 alive (for awhile). Expect an announcement by tomorrow:

• Carmakers cut production as U.S. bailout awaited- Reuters

The Madoff scandal keeps growing & getting uglier. They're saying it will take months to reconstruct the books which are in shambles. Account holders have a level of insurance ($½M) with SIPC but that won't cover all the losses for big investors. Plus holders who were cashed out early may face lawsuits trying to recover that money so it can be shared by all. Hedge funds are some of the biggest holders to come forward already. Confusion reigns.

•Madoff Books in `Disarray,' May Take Six Months to Unravel, SIPC Head Says


The rally on the widely expected Federal Reserve rate cut was based on gut reactions. The oil meeting in Algeria plus word from the White House on a bailout package for the Big 3 will each be worth temporary rallies. However dreary economic news continues, reporting terrible auto & housing sales not to mention a very weak holiday season for retailers. Stay tuned for big bumps in the road ahead.