Fed Blinks

The Federal Reserve unexpectedly slashed the federal funds rate by a bold three-fourths of a percentage point from 4.25% to 3.5%, responding to a global plunge in stock markets that heightened concerns about a recession. The Fed signaled that further rate cuts were likely. The reduction marked the biggest reduction since 1990. It also marked the first time that the Fed has changed the rate between meetings since September 2001, in response to the terrorist attacks. Despite the Fed's bold move, Wall Street plunged at the bell with the DJIA down 465 points immediately after trading started. Stocks rebounded somewhat and the DJIA finished the day off 128 points at 11,971.

ETA - turns out a good part of that global plunge was caused by SocGen unwinding its derivative positions.