Keeping track: rate cuts

Fed reduction points to an upbeat market

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An explosive rally in the stock market came as no surprise to analysts after the Federal Reserve cut interest rates last Wednesday.

Bruce Steinberg, chief economist for Merrill Lynch, noted in a January report that "the equity market nearly always had a double-digit rise within one year of the initiation of a Fed easing process." Despite weak corporate earnings so far this year, Mr. Steinberg saw "no reason why history won't repeat itself."

When the Fed made its first rate cut this year on Jan. 3, the Dow stood at 10646.15. A double-digit rise (at least 10 percent) by next Jan. 3 would push the Dow to at least 11710.

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(c) Copyright 2001. The Christian Science Monitor

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