Stocks Leap As Banks Cut Prime --- Dollar Up, Especially Against the Yen; Bonds Advance a Bit
Stock prices soared as the nation's banks bowed to pressure for lower interest rates. The dollar rose, especially against the Japanese yen, while bond prices posted only modest gains.</br></br>The Dow Jones Industrial Average climbed 42.33 points to 2930.20 in active trading. Other, broader measures of stock prices rose, too. Standard & Poor's 500-stock index closed at 380.29, up 4.94 points, and the Nasdaq Composite Index, a measure of small stock prices, was up 3.13 to 487.85.</br></br>The stock market gains came as banks across the country cut their prime lending rate -- on which many consumer and corporate loans are based -- to 8.5% from 9%. Those moves followed the Federal Reserve Board's cut on Tuesday of the discount rate -- which it charges member financial institutions for short-term loans -- to 5.5% from 6%.</br></br>Interest rates are being reduced in hopes of stimulating the moribund U.S. economy. Investors had been worrying that without further stimulation to the economy, the recession would continue for several months more.</br></br>Analysts said stock prices got an extra boost from the National Association of Purchasing Management's monthly survey, which indicated slightly more industrial activity is expected during the coming months. Although the purchasing managers' index remains far below the level that indicates a growing economy, the gain to 42.1% in April from 40% in March was encouraging.