Fed Cuts Rates

The Federal Reserve surprised traders with a rare intermeeting 50-basis point rate cut Wednesday. Stocks soared on the news.

The ISDEX http://www.wsrn.com/apps/ISDEX/ soared 23 to 335, and the Nasdaq surged 108 to 2400. The S&P 500 soared 42 to 1325, and the Dow rose 330 to 10,976. Volume rose to 567 million shares on the NYSE, and 1.05 billion on the Nasdaq. Advancers led by 16 to 11 on the NYSE, but decliners held a small edge on the Nasdaq. For earnings reports, visit our earnings calendar at http://www.wsrn.com/apps/earnings/internet.xpl and reported earnings at http://www.wsrn.com/apps/earnings/ireported.xpl. For after hours quotes and news, visit our after hours trading site at http://www.afterhourstrading.com.

B2B stocks had been weak on negative comments about i2 by CS First Boston. i2 traded as low as 34 11/16 before the Fed news hit, then soared 3 13/16 to 47. Ariba rose 2 3/4 to 44 13/16, 10 points off its low, and Commerce One rose 1 13/16 to 21 after trading as low as 16 5/8.

Broadcom soared 15 1/2 to 91 5/8, 20 points off its low. Checkpoint surged 22 7/8 to 133 3/8.

Juniper soared 27 3/8 to 129 15/16 on news that it had stolen top router expert Yakov Rekhter from Cisco . Cisco soared 7 3/16 to 40 1/2, 8 points off its low, after the rate cut.

eToys slipped 1/32 to 3/16 after announcing that it will cease European operations.

Support.com slipped 1 13/16 to 12 1/4 despite announcing a contract with IBM .

Tumbleweed Software plummeted 7 to 3 on an earnings warning.

Global Sports slipped 1/8 to 5 9/16 despite pre-announcing better than expected results.

Efficient Networks dropped 3 3/8 to 8 15/16 on an earnings warning. FairMarket slipped 9/32 to 1 13/32 on an earnings warning.

Priceline.com rose 3/16 to 1 19/32 after the company and W.R. Berkley announced that they will not go through with plans to sell auto insurance over the Internet.

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Don’t Fight the Fed is one of the oldest sayings on Wall Street, and one of the truest. Hopefully you didn’t fight them on the way down; don’t fight them on the way back up. Interestingly, the surprise rate cut announcement from the Fed came shortly after the S&P 500 filled the last remaining gap at 1275, and a day after a number of very positive divergences in the Nasdaq, indicating the index could be about to reverse. This is a significant move; two rate cuts have historically led to a rise of, on average, 15% or greater in the S&P 500. The move could lead to some jitters, since the fed obviously believes the economy is slowing significantly, but the trend should now be up. The rate cut also single-handedly sent the indexes into positive territory on the year; a good sign, given the correlation between the first five trading days of the year and the rest of the year. 2001 could be a very good year indeed for investors. We’ll have more at the close.