Surprise Rate Reduction Fuels Stock Rebound

Wall Street hates surprises, but the Federal Reserve Board sprung one Tuesday that had investors delighted.

One day after the market had just about given up hope the central bank would lower interest rates any time soon, Chairman Alan Greenspan and company trimmed a key rate 0.25 percentage point and the stock and bond markets stormed ahead.

The Dow Jones industrial average gained 34.68 points to 5,109.89, earning back a third of the losses it suffered Monday in a 101-point rout that was tied to faltering hopes of a Fed ease.

Technology companies, which had taken the biggest hits Monday in continued uncertainty over their prospects, bounded back Tuesday - and then some.

The Nasdaq composite index, a bellwether of the tech industry, jumped 23.82 points to 1,026.38, its biggest one-day point gain in more than eight years.

Declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange.

NYSE volume was 478.30 million shares as of 4 p.m., up from Monday’s 425.52 million-share session, which was shortened by one hour due to a computer glitch.

Some of the stocks that moved substantially or traded heavily Tuesday:

NYSE

Fleet Financial Group Inc., up 2-1/8 to 41-1/8.

National Westminster Bank PLC, up 2-3/8 to 59-7/8.

Providence, R.I.-based Fleet said it will buy the U.S. operations of Britain’s National Westminster for $3.25 billion, making Fleet the eighth-largest U.S. bank, with a major presence in the New York metropolitan area. Banks also benefited from the Fed’s decision to cut interest rates.

Nike Inc., up 2 to 64.

The Beaverton, Ore.-based athletic shoe company reported second-quarter net profits at 80 cents a share, vs. predictions of 76 cents. The company cited strong demand for shoes and clothing.

Hewlett Packard, up 6-5/8 to 83-7/8.

Salomon Brothers upgraded the Palo Alto, Calif. computer company to “strong buy” from “buy.”

NASDAQ

Phoenix Technologies Ltd., up 2-1/8 to 13-1/2.

Intel Corp., up 3-1/8 to 60-3/8.

Phoenix, a maker of start-up software for personal computers, signed a $20 million, 7-year deal deal with chip maker Intel Corp. to use Phoenix software on Intel-made motherboards, the main circuit boards for PCs.

AMEX

Keane Inc., down 2-5/8 to 23.

The Boston-based maker of corporate software said its fourth-quarter net will be 7 cents lower than predictions of analysts due to severance and relocation costs of its Boca Raton, Fla., office.