Dow Jones Industrial Average soared a whopping 420 points, its biggest one-day gain in more than five years – since a 447-point advance on July 29, 2002. The question that demanded Federal Reserve’s answer was pretty simple, what’s the rate cut quantum – 50, 75 or 100 basis points. While many investors were hoping for a full point rate cut, Bernanke’s boys chose 0.75 point cut instead which is sufficient to send the Dow flying, at least for the time being.

With the central bank’s latest move, the fed funds rate is now at 2.25 percent – its lowest level since December 2004. Of course the good quarterly earning result from both Lehman Brothers Inc. and Goldman Sachs Group Inc. early Tuesday helped the overall stock market sentiment as well. If there’s another investment bank suffers the same fate as Bear Stearns Cos. which was being bought by JPMorgan Chase & Co. at a bargain price of $2 a share, you can bet your last dollar that havoc would rules the trading floor.

Now analysts and economists are predicting the Fed may cut rates only once more, perhaps by a more ordinary quarter-point at the next meeting. Then Ben Bernanke would be watching with popcorns and cokes if the Bush’s $168 billion rescue package (Economy Rescue Bill) that would send “Rebate Checks” to qualified American citizen’s doorstep around May 2008 will do the tricks.

Meanwhile the anxious President Bush said Tuesday that his administration is ready to intervene again to stabilize the economy, a tone many thinks the recession is just inches away from the doorstep – although Warren Buffett have told the world (early Mar 2008) the U.S. economy is already in a recession, even if it hasn’t met the technical definition of two consecutive quarters of negative growth.

It’s too early though to say if the Dow would goes up and never look back with the latest rate cut. No doubt Google Inc. was affected and had erased some of my profits but it seems Baidu.com Inc. is still very much bearish.

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March 19th, 2008 by financetwitter

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