Fed rate cut, earnings news propel stocks sharply higher

Wednesday, April 18th 2001, 12:00 am
By: News On 6

NEW YORK (AP) _ The Fed's unexpected cut in interest rates and a stream of positive earnings news sent the Dow Industrials soaring more than 400 points Wednesday and lifted the Nasdaq composite index back above 2,000.

Earnings news had already sent stocks sharply higher in early trading when the Federal Reserve announced it was lowering interest rates by 0.5 percent. The cut, the fourth this year, gave investors hope that the economy and earnings will rebound by the end of 2001.

The Dow Jones industrials surged 421 points soon after the Fed's announcement, then settled back to a gain of 380.04, or 3.7 percent, at 10,596.77 in late morning.

The Nasdaq was up 163.74, or 8.5 percent, at 2,086.96, reaching the 2,000 level for the first time since March 15. The market's broadest measure, the Standard & Poor's 500, advanced 46.59, or 3.9 percent to 1,238.12.

The rate cut was bigger and earlier than expected, coming ahead of the Fed's mid-May meeting.

``It energized the market right on the spot,'' said Alan Ackerman, executive vice president for Fahnestock & Co. ``The market was really waiting for a catalyst, and this Fed move appears to have been just that.''

But he noted that the market remains vulnerable after months of losses and volatility, and said it was too soon to tell if Wednesday momentum would last.

The Fed's move came shortly after the Conference Board reported that its Index of Leading Economic Indicators, used as a forecasting tool, fell during March, indicating continued weakness in the economy.

Some of the Dow's lift came from General Motors, Intel and J.P Morgan Chase, all of which posted earnings that pleasantly surprised Wall Street following a litany of lowered earnings expectations and profit warnings.

After months of selling on their fears about earnings and the economy and having been braced for dismal first-quarter results, investors are finally feeling somewhat optimistic. In fact, the unexpected spate of good news was enough to overshadow an earnings warning Tuesday from Cisco Systems.

Advancing issues outnumbered decliners slightly more than 2 to 1 on the New York Stock Exchange where volume was 480.82 million shares, well ahead of 344.76 million at the same point Tuesday.

The Russell 2000 index, which measures the performance of smaller companies stocks, was up 12.90 at 468.48.

Overseas markets also made gains Wednesday. Japan's Nikkei stock average closed up 4.4 percent. In afternoon trading, Germany's DAX index climbed 2.2 percent, Britain's FT-SE 100 was up 1.1 percent, and France's CAC-40 advanced 1.8 percent.