Fed Meets Street With Quarter-Point Cut

Some observers are reserving judgment of the fate of the near-term U.S. economy, as they wait for some indication of whether recent monetary and fiscal policy measures from the government will succeed in stimulating growth. In addition to the aggressive moves by the Fed on interest rates, tax rebates -- the centerpiece of the government's $168 billion stimulus package enacted in February -- are now hitting taxpayers' bank accounts and mailboxes, intended to boost consumer spending and confidence.

On Tuesday, Standard & Poor's reported that its Case-Shiller home price index of 20 cities fell by 12.7% in February vs. last year, the largest decline since its inception in 2001. Seventeen of the 20 metro areas reported record annual declines.

Also, the Conference Board said that its Consumer Confidence Index, which declined sharply in March, fell again to 62.3 in April. That's down from the revised 65.9 last month and 76.4 in February. The consumer sentiment index, tracked by the University of Michigan, has also dropped to its lowest levels in over a quarter-century after the U.S. recorded three-straight months of declines in the job market.

Meanwhile, widened credit spreads only began to narrow after the Fed aided JPMorgan Chase's (JPM Quote) purchase of a near-bankrupt Bear Stearns (BSC Quote) and extended credit to Wall Street investment banks like Goldman Sachs (GS Quote), Lehman Brothers (LEH Quote) and Merrill Lynch (MER Quote) through a series of new lending facilities under authorities the central bank had not exercised since the Great Depression.

The implicit government backing of investment banks and mortgage giants like Fannie Mae (FNM Quote) and Freddie Mac (FRE Quote) also was welcomed by financial markets.