Ben Bernanke, Golden Goose

The FOMC of the Fed pleased all of Wall Street by cutting the federal funds rate by a full 50 basis points on Tuesday - from 5.25 to 4.75% and investors responded with the biggest single-day gains of the year.

Dow 13,739.39 +335.97; NASDAQ 2,651.66 +70.00; S&P 500 1,519.78 +43.13; NYSE Composite 9,909.03 +301.28

Stocks were already higher on the day (the Dow was up about 90 points) when Bernanke unleashed his first real policy directive onto the market. The response was impressive, though highly predictable. Buyers were running over each other to buy stocks which just a few days ago they shunned. It was everything Wall Street wanted and then some, though the cuts signal that there are indeed deep, troubling technical conditions in the US economy which needed this kind of kick-start.

Among the issues facing the US economy are a continuing credit crisis, stemming from loose policy in mortgage markets and hedge funds, a stalled-out employment market, the twin deficits - the government's and the trade imbalance - high oil prices and a weakening dollar.

Today's 1/2-point cut did nothing to salve any of those wounds, yet Wall Street found the news to be encouraging enough to go headlong into an outright exuberant shopping spree.

Bernanke, supposedly a cautious sort, showed that he could and would take decisive action to spur markets. Many expected him to only cut rates 25 basis points, but this decision showed him to be as loosey-goosey as his predecessor, the wily Alan Greenspan.

How long the excitement will last on the Street remains to be seen. The Dow is now less than 300 points from its all-time closing high and the NASDAQ, which had been sluggish of late, threw in a 70-point gain on the day. Much of today's gains were surely short covering, as those betting against the market were shocked into buying up borrowed shares.

Bernanke also cut the discount rate by the same number, to 5.25%, a move to keep liquidity in the banking and brokerage sectors.

Internals were stunningly one-sided. Advancing issues outdistanced decliners by a 6-1 margin, and new highs finally had a positive day, trouncing new lows, 268-170.

Oil continued to rise unnoticed through the euphoric atmosphere, gaining 88 cents to another all-time record high of $81.45 a barrel. As expected gold and silver were silent, both posting negligible gains.

Bernanke may be the Golden Goose today, but the question of whether he will be able to deliver more golden eggs and guide the economy through a rough time, remains an open question.