4:30PM New York, 10:30PM Frankfurt, 2:00 AM Mumbai

Market averages in New York surged on the Fed decision to lower rate by 50 basis points. The Fed action though welcomed by the stock market may prove inflationary in months to come. Gold jumped to 27-year high. Dollar fell to record low level against euro.

Dow Jones Industrial Average surged 336.05 or 2.51% to 13,739.47, Nasdaq soared 70.00 or 2.71% to 2,651.66, and S&P 500 advanced 43.12 or 2.92% to 1,519.77.

FTSE 100 Index in London gained 100.50 or 1.63% to 6,283.80, in Tokyo markets fell to 15,801.80, down 2.02% or 325.62, and in Brazil, iBovespa Index traded higher 4.6% or 2,502.52 to 56,843.06.

Bond Yields gained on 10-year U.S. bonds to 4.485% and 30-year bond to close at 4.763%.

Crude oil increased $0.94 to close at $81.51 per barrel, third record close in a row for a front month contract, natural gas closed down 8 cents to $6.57 per mBtu, and gasoline futures increased 2.96 cents to close at 207.38 cents per gallon.

Gold gained $11.50 in New York trading to close at $735.30 per ounce at high of the day, silver closed 33 cents higher to close at $13.23 per ounce, and copper for front month delivery in London fell $50.50 to $7,538.00 per pound.

Of the 30 stocks in Dow Jones Industrial Average, 1 closed lower, 29 closed higher, and none was unchanged. Banks led the gainers in the index. JP Morgan Chase led the index stock with a rise of 5.45% followed by increases in Citigroup of 5.2%, Caterpillar of 4.87%, and in Alcoa of 4.6%. Boeing was the only loser in index with a decline of 0.64%.

Of the stocks in S&P 500, 494 stocks closed higher and 5 fell, 1 closed unchanged. Fifty Seven stocks in index jumped more than 5%. Lehman Brothers and Moody’s led the index stocks with a rise of 9.5%, followed by increases of 9.2% in Cummins and Nvidia. MGIC, Macy’s, and Terex jumped 8.5%. Kroger, MBIA, and McGraw Hill added 8%.

In New York trading stocks surged to near 3% jump after unanimous decision to lower fed fund target rate by 50 basis points to 4.75%. The Fed also lowered discount rate by 50 basis points. The first rate cut in four years helped averages to jump sharply in the afternoon trading.

Investors had hoped that the Fed will lower rate in today’s meeting but were not sure of the size of the rate cut. The Fed acknowledged, in the accompanied statement, that the preemptive action is to prevent the fallout from the financial market turmoil hurting the economic stability. The Fed action, though widely rejoiced in the stock and bond market had a casualty in the currency market. Dollar fell to a record low against euro and fell 0.8% to 1.3981 to a euro. The Fed had a difficult choice to make. Lowering rate helps economy but also increases price of imported goods. The dollar is likely to trade sharply lower against pound, euro, and yen in the months to come. Oil surged to a record high for the third day in a row.

Gold jumped to a 27-year high. The rate cut was viewed by the market as inflationary and demand for gold jumped after the rate cut decision. Gold jumped 1.6% to $735.50.

Lehman Brothers (LEH: chart) reported third quarter earnings of $1.54 per share, 3% decline on 22% lower revenue. The widely watched earnings put investors at ease, after the market was prepared for large drop in earnings. Best Buy (BBY: chart) earnings jumped nearly 9%.

Kroger (KR: chart), grocery retailer, reported third quarter earnings jumped 38 cents from 29 cents a year ago on same store sales increase of 5.1% excluding fuel sales. Net earnings increased to $267.3 million from $209 million a year ago in the same period. The company raised the annual earnings guidance between $1.64 and $1.67 from $1.60 to $1.65 per share. Stock jumped 7.7% at close.

AutoZone (AZO: chart), retailer of auto parts, soared 5% after reporting earnings per share of $3.23 from $2.92 in the prior year. Gross margin improved to 50.1% from 49.7% a year ago. For the quarter sales increased 3.7% to $6.2 billion.

In European Markets trading indexes closed sharply higher ahead of the rate decision. Spain led the region with a gain of 2.5% followed by rises of 2% in France, 1.8% in Italy, and 1.6% in Belgium, Netherlands, and UK. Switzerland added 1%.

In Latin Markets trading Brazil led the gainers with a rise of 4.30% followed by increases of 2.91% in Argentina and 2.72% in Mexico. Chile gained 1.1%. Of the 63 stocks in iBovespa index 60 gained, 3 lost, and none closed unchanged. Bradespar led the gainers with surge of 7.5% followed by 7% increase in CVRD, and 6.7% in Natura, 6.5% in Lojas America, and 5.8% in Brasil Telecom and CESP.

2:15AM New York – The Federal Reserve lowered the rate by 50 basis points to 4.75%.

The Federal Reserve Bank, bowing to the pressure from the Wall Street, dropped interest rate down by 50 basis points to 4.75%. The fed funds have stayed at 5.25% since June 2006. The first rate cut in four years was designed to prevent widening financial market turmoil to broader economy.

Wall Street for days had been clamoring for a rate cut and in the last two weeks had anticipated rate cut of 50 basis points. Market analysts had projected that 25 basis points will not be enough to maintain economic stability and prevent ongoing housing market correction to slow the economic growth. The Fed also lowered the discount rate by a half percentage point to 5.25%.

The Fed’s aggressive action is viewed by market as a preemptive move to sustain economic growth and stability. Stocks rallied on the news.

The Fed statement noted that “economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.”