The central bank trims its key federal funds rate to 4.5% to shore up a slowing economy. Stocks initially slip but then push higher. Crude oil jumps over $94; energy stocks rise. Google tops $700 for the first time; Microsoft hits a six-year high.
Stocks rallied today after the Federal Reserve cut interest rates for the second time in six weeks to help the economy weather stress from the housing slump and a weakening financial system.
The central bank cut its key federal funds rate to 4.5% from 4.75%. The rate is what banks charge each other for overnight loans and affects rates on everything from auto and business loans to credit cards.
At the close, the Dow Jones industrials were up about 138 points, 1%, to 13,930. The Standard & Poor's 500 Index was up 18 points, 1.2%, to 1,549. The Nasdaq Composite Index was up 42 points, 1.5%, to 2,859 -- its best close since Jan. 24, 2001.
The Dow finished October with a 0.25% gain. The S&P 500 was up 1.48%, and the Nasdaq rose 5.8%, its best monthly gain since July 2005.
For the year, the Dow is up 11.8%, the S&P has climbed 9.2%, and the Nasdaq has jumped a whopping 18.4%.
And, the Stock Trader's Almanac says, November is the strongest month of the year for the S&P 500, the second-strongest month for the Nasdaq and the third-best month of the year for the Dow.
Energy, financial, technology and materials stocks led today's rally; Google (GOOG, news, msgs) hit $707, a gain of 1.8% and its first close above $700. Its market capitalization -- the value of its shares outstanding -- is now $216.8 billion, 5th among U.S. companies, just ahead of Procter & Gamble (PG, news, msgs).
Microsoft (MSFT, news, msgs) had its best close since June 2001. (Microsoft is the publisher of MSN Money.)
At the same time, crude oil jumped about 4.6% to a record $94.53 because of a surprising drawdown of U.S. crude supplies.
Although the Fed's rate cut was expected, investors seemed cheered because the Fed indicated it stood ready to make additional moves to shore up the economy if necessary. (And with today's report showing better-than-expected growth in the economy in the third quarter, there were a few who wondered if the Fed really needed to cut rates.)
At the same time, however, it acknowledged that increases in energy and commodity prices "may put renewed pressure on inflation."
