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Fed rate cut, jobs data may lift stocks
By Cal Mankowski
Fri Jan 25, 7:31 PM ET

NEW YORK (Reuters) - Wall Street may put the brakes on a steep decline next week, when a rate cut is anticipated from the Fed, and Friday's monthly jobs data may trigger a comeback for stocks after their January funk.

Even after this week's two-day rally, stocks finished Friday in the red and remain down sharply for the year so far. The Dow is down 8 percent, the S&P 500 is down 9.4 percent and the Nasdaq is down 12.3 percent.

The Federal Reserve's meeting is expected to result in a reduction of 50 basis points in the fed funds rate, now down to 3.5 percent.

The central bank's announcement will come only eight days after the Fed took emergency action on Tuesday and cut rates by 75 basis points. The move was surprising -- not only for its size -- but also because it came outside of a scheduled policy meeting. The Fed acted as stocks were falling worldwide and about an hour before the U.S. market opened on Tuesday after a three-day holiday.

The Federal Open Market Committee's announcement is expected on Wednesday, at the conclusion of a two-day meeting.

John Praveen, chief investment strategist for Prudential International Investments Advisers LLC in Newark, New Jersey, said investors will study the wording of the Fed's announcement. Indications that further rate cuts are possible will cheer the markets, while signs of future restraint or a "wait- and-see" attitude would be disappointing, he said.

But the Fed will not be the only game in town next week.

MORE: http://news.yahoo.com/s/nm/20080126/bs_nm/column_stocks_outlook_dc_1