(Update) Wall Street
made its highest single day gain for five years after the US
Federal Reserve acted to prevent the country slipping
further into recession by slashing interest rates by 0.75% to
Industrial Average closed overnight up 3.51% or 420.41 points at
12,392.66. The market had initially greeted the rate cut cautiously
before rallying again in afternoon trading. Earlier, the market had
been buoyed by better than expected first quarter results from
Goldman Sachs and reassuring noises about liquidity from Lehman
Brothers which had been rumoured to be having serious difficulties.
The decision was
passed by eight votes to two by the Federal Reserve's
policy making Federal Open Market Committee and leaves the
benchmark overnight lending rate at its lowest level since 2004.
The two dissenting committee members had voted for a less drastic
50 basis point cut.
It is the sixth consecutive cut in rates by the Federal Reserve
taking it down from 5.25% last September, although some market
commentators were pricing in a full percentage point cut.
The Federal Reserve
warned that economic activity had weakened further over the last
month with financial markets remaining under considerable stress.
The move follows the Federal Board's decision to also
cut the discount rate for direct loans to banks by 0.75% to