MART PARTY: DAY 2

The stock market bulls spent a second day rampaging up and down Wall Street in celebration of the Federal Reserve’s unexpectedly large interest rate cut.

But day two of the festivities produced more muted gains. The Dow Jones industrial average wrapped up the day with a 76.17 point advance to 13,815.56, while the Standard & Poor’s 500 stock index rallied another 9.25 points, or 0.61 percent, to 1,529.03.

That may feel like a ho-hum gain after Tuesday’s blockbuster 336-point surge in the blue-chip Dow, but market participants say that any further increase should be seen as good.

“Yesterday was so explosive, that it was very encouraging to see that there was any buying power left to come in today,” said John Forelli, a portfolio manager at Independence Investments.

Tuesday’s rally was partly due to short-covering and partly to a relief rally, argued Jim Swanson, market strategist at MFS Investment Management. Yesterday’s continuation, he said, can be viewed as a relatively bullish signal, in part because of the breadth of the advance.

“It’s not so much how much the index was up, but the fact that we had 400 companies post new 52-week highs,” he said.

But some analysts warn against reading too much into the two-day advance.

“This is the most surprising move by the Fed in several years, but it came in response to a period of very intense stress in the credit markets,” said Ethan Harris, chief economist at Lehman Brothers.

Even as investors celebrated the lower-interest rate environment, the Commerce Department reported that housing starts in August hit the lowest level seen since 1995, falling short of economists’ expectations.

Meanwhile, consumer prices slid 0.1 percent in August.

While data of that kind doesn’t necessarily predict that a recession is imminent, it serves as a reminder that the country’s economic woes are real and that long-lasting jubilation in response to the Fed’s rate cut may be misplaced.

“We still have to get through another 30 to 60 days of economic data and earnings reports before the next Fed meeting [on Oct. 30],” cautioned Jim Paulsen, chief market strategist at Wells Capital Management.