A dose of penicillin or a shot of adrenaline? Investors interpreted the Federal Reserve’s surprise 50 basis point cut in its discount rate as the latter – US equities surged on Friday morning, with financial stocks leading the charge.

The discount rate is that at which banks borrow directly from the Fed (whereas the Fed funds rate is a target for inter-bank overnight lending rates). Since 2003, the discount rate has sat 100bp above the Fed funds rate (after Friday’s cut the spread is 50bp). That higher cost, plus the stigma that use of the “discount window” has drawn historically, means banks use it as a last resort. RBS Greenwich Capital points out that discount window borrowing has been minimal during the turmoil.