Stocks Find Post-Fed Footing

Updated from 2:40 p.m. EDT

Stocks on Wall Street were trading choppily Wednesday afternoon following a move by the Federal Reserve to cut its target interest rate to 1%.

The Dow Jones Industrial Average was lately up 28 points at 9093, and the S&P 500 was rising 1.2 points to 942. The Nasdaq was tacking on 15 points to 1664.

Following a two-day meeting that began Tuesday, the Fed announced it had cut its key interest rate by 50 basis points to 1%, a move that had been widely expected by investors.

In its policy statement accompanying the cut, the central bank said that its board of governors had voted unanimously for the change. It said that the economy has slowed substantially and it expects inflation to moderate to levels of price stability.

Tumultuous credit markets are likely to continue to restrain spending, the Fed said. The agency also noted that recent policy action, including "extraordinary liquidity measures," should help improve credit conditions.

"The real story regarding the Federal Reserve is its various liquidity operations; the federal funds rate is second fiddle," wrote Tony Crescenzi, chief bond market strategist at Miller Tabak, on his RealMoney.com blog this morning. He said that household and business debts are tied to the prime rate, which in turn is pegged to the target fed funds rate. As such, a reduction in the target rate would still have an impact, he wrote.

Dirk Van Dijk, director of research at Zacks Investment Research, said the Fed's move was expected, but some may have been disappointed that the Fed didn't cut further. He said the U.S.'s current economic environment resembles that of Japan in the 1990s, where interest rates remained near zero while the economy stagnated. However, "I'd rather have a situation like Japan in the '90s that the U.S. in the '30s," he said.

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