Oil and commodities rally as dollar falls sharply

By Herbert Lash

NEW YORK (Reuters) - Crude oil surged nearly 9 percent and other commodities notched record percentage gains on Wednesday as the dollar posted its biggest one-day drop since 1985 after U.S. interest rates were cut.

U.S. stocks fell in a steep sell-off in the last minutes of trade, sapping a rally that had driven up the Dow and S&P by more than 2 percent after the Federal Reserve slashed two key interest rates.

The tech-laced Nasdaq rose slightly.

Wall Street sold off after the chief executive of economic bellwether General Electric was reported as saying he aimed for flat profit next year, even if revenues fall by 10 to 15 percent.

Spurred by a tumbling dollar, the Reuters-Jefferies CRB commodities index surged 5.91 percent in its biggest daily percentage gain since it was created five decades ago.

The dollar extended losses after the Fed's half percentage point rate cut, sliding more than 2 percent against a basket of major trading-partner currencies as the U.S. Dollar Index fell in its largest single-day fall in 23 years.

Stock markets around the world rallied after Wall Street posted its second-best point gain ever on Tuesday and on expectations of a Federal Reserve rate cut, helping to ease risk aversion and lead investors to pare their dollar holdings.

Leading European stock indexes closed up about 7 percent as bank and commodity stocks surged, and following a 7.7 percent gain in Japanese stocks.