(CNN) -- The U.S. Federal Reserve cut a key rate Tuesday to a range of between zero and 0.25 percent. Tokyo's Nikkei share index closed just over one percent down Tuesday.
Tokyo's Nikkei share index closed just over one percent down Tuesday.
The central bank typically sets a specific target for its federal funds rate instead of a range.
With a target range of zero to 0.25 percent it is the lowest level on record, going back to 1954. Before the announcement Tuesday afternoon in New York, the rate was 1 percent.
The federal funds rate is an overnight lending rate used as a benchmark to set rates for a variety of consumer loans, including adjustable rate mortgages, credit cards, home equity lines of credit and business loans.
This rate is the Fed's key tool for spurring or slowing slow the U.S. economy as it tries to balance its dual goals of economic growth and price stability. Lower rates are designed to encourage spending by making borrowing more affordable.
In the hours before the decision there were some losses in Asia, major European markets closed up and the U.S. indexes were trading higher.
The Dow Jones was up 1.25 percent, the Nasdaq composite 2.3 percent and the Standard & Poor's 500 index 1.6 percent in the minutes before the Fed's announcement.
In the minutes after the Dow was up 2.9 percent, the Nasdaq 3.7 percent and the S&P 3.3 percent.
Investment bank Goldman Sachs on Tuesday announced its first quarterly loss -- $2.1 billion -- since going public in 1999.
The U.S. dollar fell against major currencies as investors waited for the Fed's rate decision.
At the close in Europe, London's FTSE 100 was up 0.7 percent, while the CAC 40 in Paris rose 2 percent and the DAX 30 in Frankfurt was 1.3 percent higher.
In contrast Asian markets were mixed, with Toyko's Nikkei and the All Ordinaries index in Australia both closing just over a percent lower. In Seoul, however, the KOSPI gained a third of a percent, while Hong Kong's Hang Seng picked up 0.6 percent.
The jitters in Asia came after Wall Street lost ground Monday, giving back Friday's modest gains. The Dow Jones lost about 65 points, or 0.75 percent, while Standard & Poor's 500 index fell 1.3 percent and the Nasdaq composite slid 2.1 percent.
A trio of issues were keeping markets nervous -- waiting on the Fed's announcement, the Madoff financial scandal and continuing uncertainty about the future if teh U.S. auro industry.
The central bank was widely expected to cut the fed funds rate, a key bank lending rate, by at least a half-percentage point to 0.5 percent -- although some analysts suggested a bigger cut to 0.25 percent.
Of greater significance is what the accompanying statement says about the economy, labor market and credit crisis. A negative outlook could push markets lower.
As is often the case, the statement accompanying the rate cut decision will be of greater interest than the decision. "The Fed is going to throw everything they have to not only reverse market psychology, but reverse the downward decline in economic activity," said Peter Cardillo, analyst for Avalon Partners.
He added that the Fed might also use unconventional methods to try and stabilize the economy, like buying Treasury and corporate bonds.
Secondly, investors are trying to figure out what to make of the Bernard Madoff scandal, explained Fred Dickson, chief market strategist at D.A. Davidson & Co. Video Watch why fallout from Madoff has been so bad »
Money manager Madoff, a Wall Street figure and former Nasdaq chairman, was arrested last week on charges that he instigated a $50 billion pyramid scheme that hit companies worldwide.
And investors are still focusing on the troubled U.S. automakers after the Bush administration said last week that it might offer General Motors and Chrysler bridge loans from the $700 billion bailout fund Congress set aside for Wall Street. However, President Bush has so far declined to give a timeline for any action.
Dickson said: "Investors are expecting a rescue package to be announced, and most of that is baked into the market already."
President Bush said Tuesday he was "considering all options."
The president told CNN: "A disorganized bankruptcy could create enormous economic difficulties, further economic difficulties ... We're in a crisis now. We're in a huge recession, but I don't want to make it even worse. But on the other hand, I'm mindful of not putting good money after bad, so we're working through some options."
---------
AtW's comment: Chairman Bernanke is an idiot.
Tokyo's Nikkei share index closed just over one percent down Tuesday.
The central bank typically sets a specific target for its federal funds rate instead of a range.
With a target range of zero to 0.25 percent it is the lowest level on record, going back to 1954. Before the announcement Tuesday afternoon in New York, the rate was 1 percent.
The federal funds rate is an overnight lending rate used as a benchmark to set rates for a variety of consumer loans, including adjustable rate mortgages, credit cards, home equity lines of credit and business loans.
This rate is the Fed's key tool for spurring or slowing slow the U.S. economy as it tries to balance its dual goals of economic growth and price stability. Lower rates are designed to encourage spending by making borrowing more affordable.
In the hours before the decision there were some losses in Asia, major European markets closed up and the U.S. indexes were trading higher.
The Dow Jones was up 1.25 percent, the Nasdaq composite 2.3 percent and the Standard & Poor's 500 index 1.6 percent in the minutes before the Fed's announcement.
In the minutes after the Dow was up 2.9 percent, the Nasdaq 3.7 percent and the S&P 3.3 percent.
Investment bank Goldman Sachs on Tuesday announced its first quarterly loss -- $2.1 billion -- since going public in 1999.
The U.S. dollar fell against major currencies as investors waited for the Fed's rate decision.
At the close in Europe, London's FTSE 100 was up 0.7 percent, while the CAC 40 in Paris rose 2 percent and the DAX 30 in Frankfurt was 1.3 percent higher.
In contrast Asian markets were mixed, with Toyko's Nikkei and the All Ordinaries index in Australia both closing just over a percent lower. In Seoul, however, the KOSPI gained a third of a percent, while Hong Kong's Hang Seng picked up 0.6 percent.
The jitters in Asia came after Wall Street lost ground Monday, giving back Friday's modest gains. The Dow Jones lost about 65 points, or 0.75 percent, while Standard & Poor's 500 index fell 1.3 percent and the Nasdaq composite slid 2.1 percent.
A trio of issues were keeping markets nervous -- waiting on the Fed's announcement, the Madoff financial scandal and continuing uncertainty about the future if teh U.S. auro industry.
The central bank was widely expected to cut the fed funds rate, a key bank lending rate, by at least a half-percentage point to 0.5 percent -- although some analysts suggested a bigger cut to 0.25 percent.
Of greater significance is what the accompanying statement says about the economy, labor market and credit crisis. A negative outlook could push markets lower.
As is often the case, the statement accompanying the rate cut decision will be of greater interest than the decision. "The Fed is going to throw everything they have to not only reverse market psychology, but reverse the downward decline in economic activity," said Peter Cardillo, analyst for Avalon Partners.
He added that the Fed might also use unconventional methods to try and stabilize the economy, like buying Treasury and corporate bonds.
Secondly, investors are trying to figure out what to make of the Bernard Madoff scandal, explained Fred Dickson, chief market strategist at D.A. Davidson & Co. Video Watch why fallout from Madoff has been so bad »
Money manager Madoff, a Wall Street figure and former Nasdaq chairman, was arrested last week on charges that he instigated a $50 billion pyramid scheme that hit companies worldwide.
And investors are still focusing on the troubled U.S. automakers after the Bush administration said last week that it might offer General Motors and Chrysler bridge loans from the $700 billion bailout fund Congress set aside for Wall Street. However, President Bush has so far declined to give a timeline for any action.
Dickson said: "Investors are expecting a rescue package to be announced, and most of that is baked into the market already."
President Bush said Tuesday he was "considering all options."
The president told CNN: "A disorganized bankruptcy could create enormous economic difficulties, further economic difficulties ... We're in a crisis now. We're in a huge recession, but I don't want to make it even worse. But on the other hand, I'm mindful of not putting good money after bad, so we're working through some options."
---------
AtW's comment: Chairman Bernanke is an idiot.
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