Stocks Can't Sustain A Fed-Fueled Surge
They bought like crazy. They sold like crazy. And for a tense 15 minutes leading up to the Federal Reserve's latest interest rate cut, investors froze. Then they bought again, sold off again and called it a day.</br></br>"I can't take the stress anymore," barked Bob Basel, chief trader at Salomon Smith Barney, after the Dow Jones industrial average rode a roller coaster to an 8986.28 close -- down 24.97 points, or 0.3 percent.</br></br>The average of 30 blue-chip firms had been frozen -- down about 60 points -- until shortly after 2:15 p.m., when the Fed announcement came. "There was this sort of jump ball as to whether the rate cut would come or not," said Ed McMahon, head of U.S. trading for Merrill Lynch.</br></br>The Fed said it would cut two key interest rates -- and within 15 minutes the Dow jumped nearly 100 points, but it then bobbed up and down for the remainder of the afternoon. Day traders seeking a quick profit were out in full force, traders said, and some large computerized sell-offs kicked in during the final minutes of trading, plunging the Dow into negative territory.</br></br>"The cut was significant because it confirms that the Fed is prepared to do whatever it has to do to maintain liquidity and keep the market's momentum going," said Mary Farrell, an equity strategist at Paine Webber. "They have restored rationality in the market."