U.S Fed cut interest rates for third time; Stocks Plunged


The Federal Reserve cut the interest rate today by a quarter of a percentage point, to 4.25 percent, although it was expected to be a bigger cut than this. This had a massive impact on almost all the stocks; however the Treasury bonds prices rose. “A mild recession is now likely, with no growth for the year ahead,” Richard Berner, chief domestic economist at Morgan and Stanley declared in a report to clients this week.

The U.S. Stocks were hit by the rate cuts, the Fed’s move slumped the Dow Jones Industrial Average Index to 2.14 percent. And the S&P 500 Index saw a decline by 38.31 or 2.53 percent, to 1,477.65 at close time.

The U.K‘s benchmark FTSE 100 Index fell by 0.43, to 6,536.90 at 10.00 a.m. in London with the Germany's benchmark stock index the DAX Index declining to 0.3 percent.

The Asian stock market also showed a down slope with the Japanese stocks falling high after the Federal Reserve cut interest rates by a quarter points. This disappointed the Asian investors at large. The Nikkei 225 declined by 112.46, or 0.7 percent, to 15,932.26 at the close of trading in Tokyo. Of the index's 225 stocks, 73 rose and 140 declined and 12 were unchanged.

However the fact is very clear that the U.S Fed rate cuts have largely influenced the stocks and any rate cuts further would bring them even down. But the Bond market is flying high with investors showing much interest towards them rather than the stocks. In future may be the Bonds, the Commodities and the currencies will be at higher end than the stocks.