Dow spikes 420 points on rate cut
Wall Street surges, with blue-chip indicator seeing its best day in 5-1/2 years as investors hail central bank decision to cut rates by 3/4 of a percentage point.

NEW YORK (CNNMoney.com) -- Stocks jumped Tuesday, with the Dow surging 420 points, its fourth-biggest one-day point gain ever, after the Federal Reserve cut the fed funds rate by three-quarters of a percentage point, surprising investors looking for a larger cut.

The Dow Jones industrial average (INDU) rose 420 points, its biggest one-day point gain since July 2002, for a gain of 3.5%. The broader Standard & Poor's 500 (SPX) index added over 54 points, its biggest one-day point gain since Jan. 2001, for a gain of 4.2%.

"The market reaction was certainly positive after a little pullback," said Matt King, chief investment officer at Bell Investment Advisors. "It seems like they found the sweet spot with the decision today."

The initial setback was likely a knee-jerk reaction because people looking for a bigger cut didn't get it, said Harry Clark, CEO at Clark Capital Management.

However, after digesting it, Wall Street was perhaps realizing that 75 basis points was the right decision, Clark said, in that it suggest both that the Fed remains on top of the problems in the economy, but is not so panicked as to need to cut rates by a full percentage point.