Like I said, all about sentiment.
Found this CNNMoney article from August 17th, 2007. Interesting the change in the way it is portrayed. Full article can be found here.
The Federal Reserve, reacting to concerns about the subprime lending crisis that's rocked financial markets in recent weeks, Friday cut its so-called discount rate half a percentage point, to 5.75 percent.
The article quickly points out that it is a symoblic gesture but the spin machines back then was quickly out in full force talking about how important it was.
But one economist suggested that the Fed's discount rate cut has more than token significance. David Wyss, chief economist with Standard & Poor's, said the cut could help convince banks it was okay to keep lending to companies or consumers that actually are creditworthy.
"This is an important move. It's not just a symbolic action. The Fed is telling banks that the discount window is open. Take what you need," Wyss said.
and of course the market in the short term manipulated how the Fed wanted it manipulated.
Wall Street cheered the cut. The Dow Jones industrial average surged 300 points at the open and finished the day up about 230 points.....The Nasdaq composite closed up 2.2 percent while the S&P 500 gained nearly 2.5 percent. Stock futures were trading lower before the open after another wild day Thursday but surged following the Fed's announcement.
I remember that day very vividly. Futures were tanking. The Fed made a point to shock the market into a massive gain. Success. Just manipulating the minds of investors. It can't last forever though longer than you would believe possible. Short term you have to be impressed with what the Fed can do.