By Jon Nones
The Fed announced Tuesday that it was reducing its target for the federal funds rate, the interest that banks charge each other, from 5.25% to 4.75% - the first reduction in four years. The half-point reduction was double the quarter-point move that many economists had been expecting.

The Fed’s decision aims to boost economic growth by lowering borrowing costs for millions of consumers as the housing market slumps lower and the credit crisis worsens. Commercial banks were expected to quickly match the Fed's action by cutting their prime lending rate at 8.25%

The Dow shot up 178.19 to 13,581.61 upon the news. The Standard & Poor's 500 index rose 23.47 to 1,500.12, while the Nasdaq composite index gained 40.34 to 2,622.00.

December gold climbed to $730.50 an ounce in electronic trading Tuesday after the Fed’s decision. The contract had closed out Tuesday's regular session on the New York Mercantile Exchange at $723.70, down 10 cents.