Stocks Surge, Fed Lowers Interest Rate to 2.25%
Stocks surged on Tuesday, after strong gains in Europe and Asia, with financial stocks leading the advance. Before the market open, Goldman Sachs and Lehman Brothers reported stronger than expected earnings. Later in the day, the Federal Reserve slashed its benchmark rate by 75bp to 2.25% in an attempt to ease the credit crisis and help the slowing U.S. economy.
The Dow gained +420.41, while the Nasdaq Composite lost +91.25, and the S&P 500 +54.14.
Goldman Sachs
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PowerRating) reported a 53% decline in net profit, after writedowns and lower fixed income revenues. However, first quarter earnings of $3.23 per share beat estimates by $0.65. GS shares rose 15.6% today.
Lehman Brothers
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PowerRating) reported first quarter earnings of $0.81, a 57% drop, but still beat estimates by $0.09. After the sudden collapse of Bear Stearns, speculation that LEH could be next to fall has been rampant, but today’s numbers eased concern and led to a huge rally. LEH shares surged 43.9%.
The homebuilders also notched up big gains, with Hovnanian Enterprises, Lennar and Pulte Homes all recording double-digit percentage gains, while KB Home gained 9.8%.
In the tech sector, Yahoo!
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PowerRating) laid out its vision for the future, stating that it expects revenue to double over the next three years. The company also reaffirmed its Q1 and FY08 outlook. YHOO shares gained 7%.
The dollar had its best day versus the yen since 1999, treasuries declined, gold fell, and crude oil rose.
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