Stocks rally on Fed's rate cut, financials

New York: US stocks climbed on Tuesday after a surprisingly big interest-rate cut from the Federal Reserve added to earlier optimism inspired by a smaller-than-feared loss from Goldman Sachs.

Shares of Goldman Sachs surged over 14 per cent after the company reported its first quarterly loss since going public in 1999, but the results were not as dire as some had anticipated.

Fed cut larger-than-expected

In a unanimous vote, the Fed made a larger-than-expected cut to the the benchmark federal funds rate by at least three-quarters of a per centage point to a target range of zero to 0.25 per cent from its current 1 per cent. The Fed was expected to make a cut of at least a half a per centage point.

The U.S central bank said that it will employ all available tools to promote the resumption of growth and preserve price stability.

"Stocks like the fact that the Fed is moving forcefully to really inject more liquidity here in the economy and stimulate growth," said Craig Peckham, equity trading strategist at Jefferies & Company in New York. "The Fed is pulling another arrow out of its quiver."

The Dow Jones industrial average shot up 221.82 points, or 2.58 per cent, to 8,786.35. The Standard & Poor's 500 Index gained 25.26 points, or 2.91 per cent, to 893.83. The Nasdaq Composite Index jumped 44.79 points, or 2.97 per cent, to 1,553.13.