US stocks gain after Federal Reserve lowers rate it charges banks for loans; Dow adds 230

Stocks barreled higher Friday after the Federal Reserve did what Wall Street was clamoring for and cut its key discount rate a half %age point. The move quelled investors' credit worries at least for the time being and sent the Dow Jones industrials up about 230 points.

The Fed -- which had resisted lowering rates despite weeks of market volatility, and instead added nearly $ 120 billion in liquidity into the banking system -- cut its discount rate to 5.75 % from 6.25 %. The central bank acknowledged that the stock market turbulence that has pulled the Dow down by hundreds of points a day was posing a risk to economic growth.

The Dow surged 233.30, or 1.82 %, to 13,079.08.

The blue chip index stayed in positive territory the whole day, though trading was still volatile. The Dow rose more than 320 points in early trading, gave up more than half those gains, and then gained steam once more.

A series of triple-digit losses over the past couple of weeks has gnawed a 6 % dent in the Dow since it closed at a record 14,000.41 on July 19. The index, despite Friday's robust gains, finished down than 1 % for the week; the result of the heavy selling that preceded the Fed's move.

The Standard & Poor's 500 index rose 34.67, or 2.46 %, to 1,445.94, and the Nasdaq composite index rose 53.96, or 2.20 %, to 2,505.03.

Traders who bet on how the Fed might alter rates expect the central bank will lower the benchmark fed funds rate at its next meeting on Sept. 18. Some investors are hoping for a cut in that benchmark rate even sooner.

The pummeled stocks of mortgage lenders also saw significant increases. The most actively traded stock on the New York Stock Exchange, and one of its biggest %age gainers, was Countrywide Financial Corp. The home mortgage lender rose $ 2.48, or 13.1 %, to $ 21.43.

Energy and industrial companies also strengthened notably. The biggest gainers among the 30 Dow companies were aluminum producer Alcoa Inc. and oil company Exxon Mobil Corp., which both jumped more than 4 %.

Major European indexes recovered substantially after the Fed's announcement from steep declines in earlier trading. Britain's FTSE 100 rose 3.50 %, Germany's DAX index rose 1.49 %, and France's CAC-40 rose 1.86 %.

In Asian trading, which closed before the Fed lowered the discount rate, Japan's Nikkei stock average had plunged 5.42 % as the yen continued its climb against the dollar. The dollar briefly dipped below 112 yen for the first time in over a year, suggesting that some investors were taking their Japanese currency out of higher-yielding dollar assets.

The dollar was mixed against other major currencies. Gold prices jumped.

Advancing issues outnumbered decliners by about 7 to 1 on the New York Stock Exchange. Consolidated volume came to 5.01 billion shares, down from a record 6.13 billion Thursday.

The Russell 2000 index of smaller companies added 17.20, or 2.24 %, to 786.03.

Crude oil futures rose 98 cents to $ 71.98 a barrel. Traders have been tracking the path of Hurricane Dean, which is threatening to head west into the Gulf of Mexico, where many oil installations are located.

The Dow Jones industrial average ended the week down 160.46, or 1.21 %, at 13,079.08. The Standard & Poor's 500 index finished down 7.70, or 0.53 %, at 1,445.94. The Nasdaq composite index ended down 39.86, or 1.57, at 2,505.03.


Indian ADR's were in huge demand, ICICI Bank ,HDFC Bank and VSNL were the major gainers.

In the technology pack, Patni Computers was up 1.01% at 18.66, Infosys Technologies was up by 2.9% at 47.13, Satyam Computers was up 2.33% at 24.55, Wipro was up 5.18% at 13.82.

In the non-tech pack, ICICI Bank was up 12.86 % at 42.92, HDFC Bank was up 8.32 % at 83.95, MTNL was up 6.46 % at 6.76, VSNL was up 7.91% at 19.10, Dr Reddy's Lab was down 0.65% at 15.40, Sterlite Industries was up 2.1% at 13.63 and Tata Motors also remained up 2.16 % at 16.53.