The last time the

Federal Reserve

took the unusual step of an intermeeting rate cut was back in October 1998. Back then, investors were worried about the Russian debt crisis and huge losses at

Long Term Capital Management

. The Fed responded by cutting rates 25 basis points, compared with a 50-point cut this time.

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The October 1998 cut, one in a series of rate cuts, helped trigger a huge bull-market rally that led the

Nasdaq Composite Index

up 86% in 1999. Does the Fed move augur a return of the bull, or are the economic factors that triggered the cut going to weigh down the market? How is this intermeeting cut different? We put that question to some of the best and brightest on Wall Street. Here's what they had to say:

Ned Riley, chief strategist, State Street

:

One difference between 1998 and now is the lack of any major financial crisis this time around, vs. in '98, when we clearly had a world that was concerned about liquidity squeezes and currency issues and what I would consider critical monetary response items. There was clearly a growing concern that fundamentals were deteriorating so rapidly and monetary policy this time was being geared to domestic factors as opposed to world crisis factors.

The Federal Reserve acknowledged the fact that this time around, it was the Nasdaq that may have been providing the financial crisis, as opposed to the factors that facilitated the easing back in 1998. I think the Fed clearly recognizes that the public has more participation today, either directly or indirectly in those technology-related investments, and that was undermining some consumer confidence, and clearly eroding some of the fundamentals of the economy itself.

Now, the Fed has never admitted to targeting the market with monetary policy, and today it hasn't, either. But clearly because of the close relationship that the Nasdaq has with retail sales activity, I don't think they could ignore it as a very significant economic variable that probably had more influence over consumer demand than any cuts in loan rates or mortgage rates.

The economic news is not going to get any brighter in the next two to three months because of rate cuts. There won't be any huge direct stimulation to consumer demand or housing activity or any other retail-related spending. But longer term, I think the Fed is hopeful at least of stabilizing the capital markets to that it is not a tremendous detriment to economic growth but maybe a neutral factor.

Bruce Kasman, senior U.S. economist, J.P. Morgan

: I think there are quite a number of differences between now and then. In 1998, the rate cut came after a

prior easing of 25 basis points. This is the first time the Fed has begun a cycle of easing or tightening with an intermeeting move, since it began announcing policy changes in 1994. That's quite a momentous event.

The second thing, and perhaps the most important, is that in '98,

the cut was in response to financial events. There was a fear that the financial system was easing up; the Fed was responding mostly to that. I think the main message to take away from this development and also in the economy over the last few weeks is that the Fed is responding to concerns that the economy might be going into a recession. That's not to say we are, but data from the last three or four weeks

suggest the possibility exists.

This is not a response to financial events, but to the dynamic of the economy. This is a sign of the economy actually slowing. The bottom line is, the Fed will probably have to respond with rate cuts over the next two or three meetings. We expect 75 basis points' easing by the end of the first quarter. That's what would be required to get the Fed back to a neutral stance.

Dick Rippe, economist at Prudential Securities

: Fears about the Russian economy forced the Fed's hand in 1998.

This time, the situation is centered on the health of the economy.

Far more important than anything else was what the Fed said in its press release. It is basically concerned about the impact of decreasing money flow on the economy.

Peter Coolidge, managing director of trading at Brean Murray Foster Securities.

: In 1998, there was also a turn in the market when the Fed made the move.

This time, I think the market is putting too much emphasis on the Fed rate cut. We're seeing very good volume. The market, especially the Nasdaq, is euphoric about this.

But at the same time, the move signals problems in the economy.

The Fed's action indicates that we are in a period of slowing, headed toward or in a recession.

The market is hoping for a signal that, like then, the rate cut signals the bottom of the market. Only time will tell. But this time it's not a crisis of confidence, there's a slowing of the economy. Rate cuts it can't alone turn the tide. There are other factors.

Staff reporters K.C. Swanson, Kristen French and Anwar A. Husain contributed to this article.