Fed's rate cut made indexes rise dramatically by Corina Ciubotaru

It looks like a rate cut was all the Fed needed to do to give the American economy a breath of fresh air. Following a cut by half a percentage point in the funds rate, all of the stock indexes rose dramatically: the Dow increased by 335.97 or 2.51 percent; the NASDAQ composite index soared by 70.00 or 2.71 percent; the Standard & Poor's Index 500 rose 43.13 or 2.92 percent, while the Russell 2000 index of smaller companies rose by 3.97 percent to 806.63. For the Dow, it was the biggest gain since 2003 while the S&P and NASDAQ haven't risen this much since 2002. This massive investment in the stock market came about because nobody thought the Fed would actually go through with the alleged half-point cut and it also led to the dollar dropping seriously by comparison to the euro. Oil prices exceeded $81 per barrel, and the price of gold has also increased dramatically. But will it be enough to support the entire economy's return to normal? The housing market is the main factor that's going to hold back economic growth for the next period of time, as more jobs might be lost in the construction or manufacturing industry. Many houses have remained unsold and people will have to pay higher mortgage rates as the Fed's rate cut is only beginning to take effect. The American economy is not expected to grow significantly for the rest of the year, but at least some change is starting to show.

related story: http://news.yahoo.com/s/ap/20070918/ap_on_bi_st_ma_re/wall_street;_ylt=Anv6L1QNnYfRdHQS7sPM5fKs0NUE

by Corina Ciubotaru for PocketNews (http://pocketnews.tv)

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edited by Barbora Matulova