Nasdaq · October 15, 1998

The day the Fed cut outside a meeting

+4.55%

single-day change vs previous close

Part of a longer stretch

The Nasdaq's snap-back after LTCM

early in it · 1998-10-08 → 1998-11-27, +42.09% over the whole period

What happened that day?

The Nasdaq rose 4.55% on the day
The Fed cut rates abruptly, outside a scheduled meeting — the second of three cuts that autumn
Moving outside a meeting signals urgency. Yet the market did not read it as frightening but as a commitment to hold things up
The problem then was not the economy but funding markets. Money fleeing risk had crowded into government bonds and corporate bond trading had stopped
Cutting rates loosens that. Funding markets did return to normal quickly after this cut
The response left something behind: the expectation that the Fed will always rescue took hold, and that expectation inflated the final two years of the dot-com bubble

Sources

Every figure on this page is recomputed from the original daily closing prices and checked against them at build time. The account of what happened is written from the sources listed above.