U.S. stocks rose on Wednesday after signs that the economy is showing strong growth and expectations that today's Federal Reserve quarter-point cut for its benchmark interest rate will promote growth.
The bluechip stock Dow Jones Industrial Average index rose 137.54, or 1 percent, to 13,930.01. The technology heavy Nasdaq Composite Index gained 42.41, or 1.5 percent, to 2,859.12. The broader Standard & Poor's 500 Index was up 18.36, or 1.2 percent, to 1,549.38.
The U.S. Commerce department reported Wednesday before the Fed's announcement that the country's gross domestic product in the third quarter had grown at an annual rate of 3.9 percent, topping analyst expectations of 3.2 percent growth. The news early in the day sent stocks higher.
In the afternoon, the Federal Reserve Open Market Committee voted to lower it federal funds rate to 4.50 percent, citing strong economic growth but warning that the housing downturn had intensified. The FOMC's statement left open the chance for further cuts but was worded in a way that it was not likely to.
After the announcement, shares initially dipped into negative territory but soon rebounded. The cut had been highly expected.
Shares of some financial firms, which have borne declines caused by losses in the mortgage and credit markets, rose during the day ahead of the Fed's statement. Gainers included Lehman Brothers and Goldman Sachs which both rose 3.2 percent. Morgan Stanley was up 2.7 percent. Bear Stearns was up 0.7 percent. Decliners included Citigroup which slipped 0.7 percent and Bank of America fell 0.6 percent.
New home builders fell, however, with Lennar dropping 7.6 percent, Hovnanian falling 7.3 percent and KB Home losing 2.7 percent. The largest U.S mortgage lender, Countrywide Financial dropped 2.6 percent for the day.
Other gainers included Microsoft which gained $1.24, or 3.49 percent to end at $36.81, after a Sanford C. Bernstein & Co. analyst said shares were undervalued due to the software maker's growth potential.
Mining firm Newmont Mining rose $4.46, or 2.5 percent, to $50.90 after its third-quarter earnings beat analysts' estimates.
MasterCard Inc rose 21 percent after a strong quarterly earnings report. Drug distributor McKesson Corp was up 13 percent