Stocks jumped Tuesday after the Federal Reserve (Fed) cut a key U.S. interest rate to the lowest level in history and signaled it had more tools available to help the economy as the recession continues. Stocks had been up modestly, but surged after the mid-afternoon Fed announcement. The central bank lowered the key interest rate to below 0.25 percent, the lowest level on record. Before Tuesday's move, the rate stood at a very low 1 percent. In its closely watched statement, the Fed said the economic outlook had worsened amid a deteriorating labor market and weaker consumer spending and business investment. The central bank also said inflationary pressures have disappeared. The Fed has reduced interest rates since September 2007 in an effort to limit the negative effects of the economic slowdown, but the economy has actually worsened. The United States has been in recession since December 2007 and is expected to remain in one through next year. In economic news, U.S. housing starts and building permits fell to record lows in November, the latest sign that the market has not yet reached bottom. Housing starts plummeted more than 15 percent last month, while building permits fell significantly. A second report showed weaker consumer inflation than had been expected, with prices falling 1.7 percent in November. Light sweet crude oil for January delivery fell 91 cents to $43.60 a barrel on the New York Mercantile Exchange after rallying in the morning on beliefs that OPEC will reduce output during its meeting in Algeria. The U.S. dollar fell to an eight-week low versus the euro and hovered near a 13-year low versus the yen. In company news, Goldman Sachs reported its first quarterly loss since becoming a publicly traded firm in 1999. Despite the results, its shares gained 14 percent. The Dow Jones industrial average rose 359.61, or 4.2 percent, to 8,924.14. Financial stocks gained, led by J.P. Morgan Chase, Bank of America, and Citigroup. Shares of troubled automaker General Motors rose as well. The broader Standard & Poor's 500 index rose 44.61, or 5.1 percent, to 913.18. The technology-heavy Nasdaq composite index rose 81.55, or 5.4 percent, to 1,589.89. The New York Stock Exchange composite index rose 307.07 to 5,804.97. The American Stock Exchange composite index rose 71.55 to 1,390.64. And the Russell 2000 index rose 30.28 to 482.85.
