Wall Street Advances As Investors Dream Of Rate Cuts

by Darren

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Investors really love rate cuts. They must think a rate cut is some sort of a magic bullet for the economy, because every time they hear about one, they get giddy with excitement. Today is no different as the general indexes rebounded, despite a blow to UBS in the rang of $10 Billion.

Investors remained upbeat ahead of the Fed’s rate-setting meeting on Tuesday. Policymakers are broadly expected to lower rates, though economists are still split over whether there will be a quarter-point cut or a half-point cut.

The National Association of Realtors gave Wall Street reason to be optimistic about the economy Monday when it said its forward-looking index of U.S. home sales rose in October for the second month in a row. Though investors are still expecting the housing market to remain weak well into 2008, the association is forecasting sales and prices to start recovering modestly next year.

The downturn in housing has led to huge losses among banks that invested in securities backed by mortgages, and on Monday, UBS was the latest to reveal large writedowns. The Swiss bank said it will write down some $10 billion of subprime mortgage holdings, which could lead to full-year losses. However, its U.S. shares rose 92 cents, or 1.8 percent, to $51.40 as the bank unveiled plans for an $11.5 billion cash infusion from the government of Singapore and an unidentified Middle Eastern investor.

This is the second major investment from a Middle East heavyweight in the last few weeks. Despite the gloom and doom from UBS, there’s a small glimmer of hope that things may be getting better for all.

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