RENEE MONTAGNE, host:
NPR's business news starts with the Fed's surprise rate cut.
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MONTAGNE: Facing increasing fears of recession, the U.S.Federal Reserve cut its key federal funds rate by three-quarters of a percentage point. The rate is now 3.5 percent. This morning's is the biggest single move the Fed's made on interest rates in 13 years. It comes after sharp drops in stock markets across the globe. Today, Tokyo's main index was down more than 5 and a half percent after a sharp drop yesterday as well. Officials in India halted trading after stocks there plummeted more than 11 percent.
STEVE INSKEEP, host:
And then, as things moved west, in London, Paris and other European capitals, stock markets see-sawed on rumors that policy makers in Washington might do something. Then after finding out the Fed actually did cut rates this morning, the reaction in the European stock markets was mixed. Though on the end, most major indices ended slightly higher. John Authers is global investment editor at the Financial Times newspapers.
Mr. JOHN AUTHERS (Global Investment Editor, Financial Times): I don't think anybody is thinking long term enough to really work out what the economic, macroeconomic effects of this will be. When markets get this churned up, this turbulent, it just becomes a game of trying to second guess what everybody else is doing. It's a collective action problem, and it's about gauging the surges of emotion going on around the world. It doesn't look as bad in the U.S. as it looked initially, and therefore, Europe - which was ready for a bounce - has had something of a bounce.
INSKEEP: John Authers, global investment editor of the Financial Times newspaper. Talk about swings of emotion - the Dow Jones Industrial Average was down around 450 points at one point this morning. Then it came back and was close to even - 40 to 50 points down. And just a few seconds ago, it was about 150 points down, having slid a little bit again.
We go now to NPR's Jim Zarroli, who is in New York. And how do things feel there, Jim?
JIM ZARROLI: Well, it - I think things - I feel like they've gotten a bit better. You know, as - this morning, as soon as the market opened, you had this just huge drop right away. You know, the Dow, I think, fell as much as 464 points, and it was very quick. I mean, it was the kind of dramatic, sharp drop that you don't see very often. You saw it this morning.
Within about a half an hour, things had sort of recovered, and it's been kind of up and down ever since then. We still have triple-digit losses, but the losses are a lot less than they were. For instance, Citigroup - which, of course, is one of the banks that's been at the center of this credit market turmoil - was actually down 7percent as soon as the market opened. A little while ago, it was back in positive territory. So who can figure that out?
They're - it's just extreme volatility. Markets don't know what to make of it. I've heard the word panic used this morning. I mean, this is still a very bad market. Barring a big rebound, this is going to be the worst January for major - at least for the major stock indexes that the market has ever seen.
INSKEEP: You could have hoped the surprise rate cut by the Fed - not a surprise that they cut it, but that they would cut it by so much and so quickly. You could have hoped that that would cause stocks to go higher.
ZARROLI: Yeah. That's normally the way it works. And, in fact, that's the point of doing this kind of dramatic, big rate cut, and to do it between meetings, when people aren't really expecting it. It's supposed to have this kind of shock effect, to give people this - just this boost of confidence, a boost - give the economy a kick. And that was what they were hoping. You know, that's what they did. That's what the Fed did after 9/11, for instance. But today, the market - the stock markets almost just seem to disregard it. It was almost as if it hadn't happened - at least at the beginning. I think it says something about the amount of fear there is out there right now. I mean, you know, we had a weak employment report earlier this month for December. We've had just consistent weakness in manufacturing. You know, we've had, you know, just an economy that is clearly slowing down, if not in recession already. And nothing seems to work to make the markets feel better.
We have had talk about a major stimulus package - $150 billion. And the president said this morning it could even be more than that. We have these interest rates falling down. None of it seems to have worked to just alleviate the fears that are out there. Now one point that has to be made is that I think that everybody in the markets knew that a big rate cut was coming. It was just the timing of it that's kind of a surprise today. I mean, chairman Bernanke made that pretty clear last week, as clear as he ever does in his testimony before Congress that a rate cut was coming. The question was just how much. At this point, I think people, you know, especially in the stock market, as it tends to do, it's focusing on what's going to happen next. And a lot of people are saying, you know, when the Fed meets next week, there's going to be another rate cut.
INSKEEP: Very briefly, it's also a reminder, I suppose, of how interconnected world markets are. Things that are problematic in the United States, that eventually causes markets in Asia to fall, which leads to a drop in Europe, which, in turn, causes more trouble in the United States.
ZARROLI: Yeah, yeah. Certainly. I mean, this is a market that is just signaling fear about the world economy. I mean, we had all these problems happening. You know, we've had the big banks in trouble because of the credit crunch, and I think everybody's just reacting to that.
INSKEEP: Is there anything else the Fed can do if today's rate cut doesn't work?
ZARROLI: No. The - you know, the Fed has basically one blunt instrument, and that's rate cuts. And it can keep doing that in that - now, one of the things about a rate cut is that it generally takes a while before it has impact on the economy. It can take as much as a year. That's one of the problems, maybe, for the markets right now, that they don't see this having the kind of immediate impact that they would like. And this is - you know, that's one of the issues that the market is facing right now.
INSKEEP: Jim, thanks very much.
ZARROLI: You're welcome.
INSKEEP: That's NPR's Jim Zarroli in New York, where the latest word we have is that the Dow Jones Industrials are down about 150 points today. Could be worse.