Fed Fuels Comeback Rally

The Federal Reserve decision to lower rates pumps up the tech market -- and rescues the Light Reading Index

January 3, 2001

2 Min Read
Fed Fuels Comeback Rally

Just when financial circumstances where starting to look dire, the technology market and the optical networking market roared back to life today.

The Federal Reserve today unexpectedly cut interest rates by half a point, and the Light Reading Index was a major beneficiary. The index was down until 1:02 PM, when the Fed announced its surprise decision. It closed up 115.75 (18.72%) on the day at 734.14.

The Federal Reserve cut the fed funds rate by a half a percent to 6.00 percent and the discount rate by one quarter of a point to 5.75 percent. The fed funds rate is the rate that banks charge each other on overnight loans to help them meet reserve requirements. The discount rate is the rate that the Fed charges banks on overnight loans for the same purpose.

The move came unexpectedly, as the Fed’s next scheduled meeting is in four weeks. Analysts feel the move was prompted by a slew of dismal economic reports like the National Association of Purchasing Management's report, released yesterday, which said the manufacturing sector declined in December for the fifth consecutive month. Also, a Department of Labor report due out Friday is expected to reveal more signs of a slowing economy.

Among the big gainers in the Light Reading Index today was Juniper Networks Inc. (Nasdaq: JNPR), which was up $29.44 (28.70%) to 132.00. Yesterday, Juniper scored another point in their competition with Cisco Systems Inc. (Nasdaq: CSCO) by announcing they had recruited a top network engineer (see Routing Maestro Quits Cisco).

But today's rise lifted all boats, particularly familiar, larger capitalization names like Cisco, which was up $8.00 (24.02%) to $41.31.

Extreme Networks Inc. (Nasdaq: EXTR) bounced back after being smacked down yesterday (see Bears Rip Through Market), when it announced it was acquiring privately held Optranet (see Extreme Spins In Optranet). Aiding Extreme was a Buy recommendation issued yesterday by Salomon Smith Barney, which expects the company to beat earning estimates. Extreme finished the day up $12.88 (46.61%) to $40.50.

In other news, Foundry Networks Inc.'s (Nasdaq: FDRY) announcement that it signed a deal to provide “routers” to Verio proved to be nothing new, as Foundry has been selling to Verio for some time (see Foundry's Verio Deal Lacks Teeth). Foundry closed up $1.00 (6.69%) to $15.94.

Other Light Reading Index stocks that gained more than 30 percent included:

  • JDS Uniphase Inc. (Nasdaq: JDSU) up $14.38 (36.62%) to $56.63

  • Newport Corp. (Nasdaq: NEWP) up $22.06 (32.33%) to $90.31

  • Redback Networks Inc. (Nasdaq: RBAK) up $10.63 (31.19%) to $44.69

  • SDL Inc. (Nasdaq: SDLI) up $53.69 (38.71%) to $192.38.

    The full Light Reading Index can be viewed here.-- Matt Malina, research associate, Light Reading http://www.lightreading.com

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