October 9, 2008
Rates Cut, Stocks Down
By Jeannine Aversa
WASHINGTON - Wall Street bounced higher and lower Wednesday trying to make up its mind about an unprecedented coordinated interest rate cut by central banks around the world. In the end it settled on a familiar feeling - fear - and plunged again.The Federal Reserve, desperately trying to jump-start lending that keeps the U.S. economy moving, dropped its closely watched federal funds rate to 1.5 percent. The cut from 2 percent took the rate to its lowest level in more than four years.
Central banks in England, China, Canada, Sweden and Switzerland and the European Central Bank also cut rates after a series of high- stakes phone calls over several days between Fed Chairman Ben Bernanke and his counterparts.
But the Dow Jones industrial average lost another 189 points, or 2 percent, to close at 9,258.10. It was the sixth straight day of losses for the Dow. The index has shed more than a third of its value, nearly 5,000 points, since its all-time high, set one year ago Thursday.
The Dow opened down more than 200 points. Within an hour, it was up almost as much. The Dow was ahead for the day in the last half- hour of trading, then took a dive at the close.
The day's losses were lighter for the Nasdaq composite index and the Standard & Poor's 500. And Wall Street as a whole fared far better than Asia, where some exchanges were down 9 percent, and Europe, where some lost 5 percent.
For millions of Americans, the Fed's cut means borrowing money becomes cheaper. Home equity loans, credit cards and other loans all fluctuate depending on what the Fed does.
Bank of America, Wells Fargo and other banks cut their prime rate by half a point to 4.5 percent, also the lowest in more than four years, after the Fed's decision early Wednesday.
Fed watchers believe the central bank might cut rates further this month, and perhaps again in December, in hopes of cushioning the blow if the United States falls into recession.
"Even if the financial crisis was put to bed today, that would still leave the economy in a probable recession," said economist Ken Mayland, president of ClearView Economics.
Even the coordinated action may not break the panicky mind-set that has gripped investors across the world as jobs evaporate and retirement savings dry up.
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