Fed's Rate Cut Highlights Bulls' Return to Wall Street

ByABC News
April 19, 2001, 9:17 AM

N E W  Y O R K, April 19 -- The Federal Reserve's unexpected interest-ratecut gave Wall Street a triple-digit rally and one of its strongestperformances this year. But the real news may be that the bulls arere-emerging.

After months of uncertainty about where stocks are headed, agrowing number of analysts believe the worst may be over for themarkets.

"While we may see some pullback because this has been such abig day, I do think the trend is upward from here," said MattBrown, head of equity management at Wilmington Trust. "There's astrong correlation between aggressive Fed action and improved stockmarket performance."

Confidence Boost

The optimism comes despite expectations that corporate earningswill continue to be weak for months and a Fed statement Wednesdayindicating it is quite concerned about the economy.

Analysts say stocks will definitely slide again, but what'schanged is their confidence. They're more convinced than ever thatthe stock market and the economy, albeit at a slower pace arestarting to improve.

"As far as the kind of devastation we saw in 2000, the worst isover. We might test our lows again, but as far as the free-fall wesaw, that has come to an end," said Charles Pradilla, chiefinvestment strategist at SG Cowen Securities. "This is not the endof the market's problems, but the beginning of its healingprocess."

The Fed said it was cutting rates for the fourth time this yearbecause of "rising uncertainty about the business outlook," amongother concerns. But those worries and the fact the Fed took theunusual step of acting between regularly scheduled meetings failed to dampen Wednesday's enthusiasm.

Investors sent the Dow Jones industrials up nearly 400 points,while the Nasdaq composite index which remains in a bear market rose 156 and the Standard & Poor's 500 index gained 46.

"The stock market's recovery usually occurs before theeconomy's," said Jeff Hirsch, publisher of the Stock Trader'sAlmanac. He said that since 1949, the average gain realized frombetween the time the Dow bottomed to an end of a recession wasabout 24.5 percent.