Election Section

NEW YORK — An interest rate cut by the Federal Reserve is usually cause for celebration on Wall Street. But investors had to sleep on it before rallying the day after the Fed’s sixth such move of the year. 

Analysts weren’t surprised by the initially cautious response to the rate cut Wednesday; the market has become increasingly convinced that better corporate earnings, not Fed policy, will presage any business turnaround. 

“We still haven’t seen the effect of the initial rate cuts, so it’s harder to get excited about the sixth one,” said Rafael Tamargo, director of equity research at Wilmington Trust. 

The rate reduction also was widely anticipated, meaning investors had been buying and selling on lower rates ahead of the official announcement. And the cut was smaller than the market had wanted — a quarter of a percentage point, rather than the half-point many money managers predicted. 

What changed? 

“I think people thought about it overnight and realized it didn’t matter” that the cut was smaller than expected, Tamargo said. “What mattered was that the Fed had made the cut and indicated it would cut again if necessary.” 

Still, the market’s reaction illustrates one of the frustrating truths about Wall Street in an economic downturn. 

Although the Fed’s interest rate cuts have provided a buffer against strong selloffs by reassuring investors that help is on the way, the reductions haven’t provided a catalyst for a significant, sustainable rally. 

Instead, with more than 600 corporate warnings this quarter, the market has become even more hesitant to commit to stocks of companies that can’t say their performance will soon improve. 

Analysts say the market is mired in what’s called a trading range, with the averages unable to advance or fall below a certain level. 

The Dow Jones industrials, for example, have been trading between 10,500 and 11,400 since mid-April. The Nasdaq has been hovering between 2,000 and 2,300 since about the same time, while the Standard & Poor’s 500 index has traded between 1,200 and 1,300. 

“In a trading range, people generally trade off extremes in investor sentiment,” said Richard Cripps, chief market strategist at Legg Mason in Baltimore.  

“What we’ve seen this week is a market that had become oversold and negative, so people started buying.  

“They’ll sell when the market becomes too high. But the overall market won’t advance beyond that.” 

Don’t expect the time of year to help either. Summer is traditionally a slower time for Wall Street and business deals. Trading volumes tend to decrease as the nation goes on vacation. 

All of these factors played a role this past week. 

So did news that a federal appeals court had reversed a lower court ruling that had ordered the breakup of Microsoft intensified the positive sentiment. Analysts say bargain hunting influenced trading, too. 

The end of the quarter was still another contributor. With the second-quarter ending Friday, professional money manager spent the early part of the week selling and adjusting their portfolios.  

As the week wore on, that pressure decreased, allowing stocks to advance somewhat. 

New earnings warnings on Friday dampened investors’ enthusiasm somewhat, although the indexes managed moderate gains. Trading volume was also light before the Independence Day holiday. 

“The problems still remain, and until there’s solid signs that the economy and earnings are improving, the sustainability of any advance is going to be questionable,” said Charles White, portfolio manager for Avatar Associates. 

For the week, the Dow lost 102.19, or 1 percent, after dropping 63.81 to 10,502.40 on Friday. 

The Nasdaq gained 125.70, or 6.2 percent, for the week, following a 35.08-point gain to 2,160.54 Friday. 

The S&P 500 index was essentially unchanged for the week, slipping 0.97, or 0.1 percent. It dipped 1.82 Friday to 1,224.38. 

The Russell 2000, which measures the performance of smaller company stocks, 23.99 or 4.9 percent for the week after gaining 9.65 Friday and closing at 512.64. 

The Wilshire Associates Equity Index, the market value of NYSE, American and Nasdaq issues, was $11.41 trillion Friday, up $94.69 billion from last week. A year ago the index was $13.62 trillion. 

Lisa Singahina is a business writer for The Associated Press.