Wall Street rises after Fed cuts interest rates by expected half-point

NEW YORK -- Wall Street surged higher Wednesday after the Federal Reserve, confirming that there is increasing stress on the economy, cut interest rates half a percentage point and indicated that more rate reductions were possible.

The Fed's statement accompanying its decision to lower both the target fed funds rate and the discount rate reiterated the central bank's concern about the weakening economy.

"Financial markets remain under considerable stress, and credit has tightened further for some businesses and households," the Fed said. "Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets."

Most investors had expected a half-point cut. Perhaps most important was the central bank's assurances that it was willing to take further action to support a flagging economy.

"The committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks," the statement said, referring to the Fed's policy-making Open Market Committee.

In the minutes just after the Fed decision, the Dow Jones industrial average rose unevenly, at one point jumping more than 100 points. The blue chip index was up 113.73, or 0.91 percent, at 12,594.03, after rising 273 over Monday and Tuesday.

Broader stock indicators also rose. The Standard & Poor's 500 index rose 14.57, or 1.07 percent, at 1,376.87, while the Nasdaq composite index rose 23.32, or 0.99 percent, to 2,381.38.