Fed cuts rates, at last

Wall Street posted a 335 point gain to close at 13 739 on Tuesday after the Federal Reserve slashed key interest rates by a 1/2 point to ease stessed credit and housing market concerns. Investors cheered the Federal Reserve decision to cut the federal funds rate, (where banks charge each other for overnight loans), by a half point to 4.75 %.

The Fed aslo cut the Fed's discount rate (where banks borrow from the Fed) by the 1/2 point, to 5.25 %. Much speculation over how much the Fed would cut rates, with investors expecting a 1/4 point cut, and hoping for a 1/2 point cut, were dismissed with a cheer as rates were cut by 1/2 point. The news sent shares sky rocketing.

A small rate cut usually indicates more rate cuts to come. With the Fed's bold move today, investors are weary that gains may be short lived. Inflation does not seem to be an immeadiate concern. However, crude oil prices hit a fresh record high on Tuesday above 80 dollars a barrel. Financial stocks did well today. Bank of America, the second-largest US bank whose boss warned late Monday that third-quarter results would be hit by the credit crunch, gained 3.43 percent at 51.21 dollars. Citigroup rose 5.08 percent to 48.37 and JP Morgan advanced 5.59 percent to 47.82 dollars.

The yield on the 10 year bond rose to 4.480 percent from 4.462 yesterday. The public is still waiting for banks to refresh their position on Jumbo loans as $ 2 trillion worth of loans are set to adjust in the next year.