Fed Slashes Key Rate

After the Fed's announcement, fed funds futures showed that investors are looking for the rate to be lowered another 75 basis points to 2.75% by mid-March.

On the fiscal side of things, President Bush and congressional Democrats promised last week to compromise quickly on a fiscal stimulus package designed to head off recession by providing U.S. consumers with extra spending power. Investors have shown little enthusiasm for the prospects of success for such an effort.

Bernanke testified in support of fiscal stimulus in Congress amid a stock market selloff Thursday. On Tuesday, the Bush administration offered support for the Fed's move.

Have No Fear, the Fed Finally Gets It

"This is very constructive, and I think it shows this country and the rest of the world that our central bank is nimble and can move quickly in response to market conditions,'' Treasury Secretary Henry Paulson said following the announcement.

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