Benzinga | Oct 28, 2021 12:05PM EDT

This Day In Market History: Dow Gains 11% In 2008 On Interest Rate Cut Optimism

Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened: On Oct. 28, 2008, the Dow and S&P 500 each gained roughly 11% on optimism surrounding another potential Federal Reserve interest rate cut.

Where The Market Was: The Dow Jones Industrial Average traded at 9,065.12, and the S&P 500 finished the day at 940.51.

What Else Was Going On In The World? In 2008, General Motors Company (NYSE:GM) reported a $38.7 billion loss for 2007. Crude oil prices hit an all-time high of $147 per barrel. The average American income was $40,523.

Mortgage Crisis Bounce: In the six months leading up to Oct. 28, 2008, the S&P 500 was down 39.2% and the Dow was down 36.4% as investors feared the mortgage crisis could potentially drag down the entire financial system.

Investors got a breather from the sell-off on Oct. 28, however, thanks in large part to investor optimism that the Federal Reserve would step in with another interest rate cut to support the economy.

Interest rates peaked at 5.25% in June 2006, but the Fed began cutting rates in response to the downturn in the housing market beginning in September 2007. On Oct. 8, 2008, the Fed cut interest rates from 2% to 1.5%. The day following the big rally, the Fed again cut interest rates to 1% on Oct. 9, 2008.

Unfortunately, the relief rally didn't last long. In December 2008, the Fed cut interest rates to an unprecedented target range of between 0% and 0.25%. Even with rates down to essentially 0% and the government pumping hundreds of billions of stimulus money into the economy, the stock market wouldn't reach its ultimate financial crisis bottom until March 2009.