Impact of interest rate cut on stock market

The Fed Reserve’s decision of key interest rate cut on August 17, 2007 had given an indication to worldwide stock market investors about loosening of liquidity crunch and trying to prevent disturbance that started in the market for household mortgages from scattering through the economy. The Fed reserve decision on interest rate cut was taken as surprise that boosted the stock market sentiment and worldwide stock market rallied on.

From last couple of weeks the ways the worldwide stock market was behaving was quite annoying and was spreading a fear among investors regarding the liquidity crutch which was impacting in significant way in many of the stock market worldwide along with the Dow. The stock market from Europe, Japan, Korea and other developing countries like China, India, Taiwan, Brazil, etc was hammered quite significantly from their peak level. Due to this situation, the thing was going quite tough for the small investor to take a call on stock trading.

Now with this interest rate cut move made by Fed Reserve, and also big brokerages believing this interest rate cut move will continue in the next Fed meeting also, will bring down the liquidity crunch in market and will help to raise economy rate.

The Dow ended the day up 1.8 %, 233.30 points, at 13,079.08.