The Federal Reserve Open Market Committee concluded its two day meeting in Washington Wednesday with the announcement of a series of bold inititatives intended to shore up sagging credit markets.

The OMC said it would buy up to $300 billion in long-term treasury securities, buy up to an additional $750 billion in agency mortgage backed securities and increase the amount allocated to buying agency debt by $100 billion to a total of up to $200 billion.

The Fed also voted unanimously to keep its interbank lending rate at between 0% and 0.25% and its discount rate at 0.5%.

Wall Street, which had been lagging behind yesterday's rally all day, immediately turned around with a jump of nearly 200 points on the Dow Jones Industrial Average. Home builder stocks, led by a remarkable 41.4% jump in the price of Hovnanian (NYSE:HOV) to $1.36, were mostly posting double-digit percentage gains on the news shortly after the Fed's statement was released.The penny stocks did the best. Along with Hovnanian, Beazer (NYSE:BZH), also badly beaten down in recent weeks, was up 28% to $0.96, Orleans (ALT:OHB) was up 16% to $1.44 and Standard Pacific (NYSE:SPF) was up 17.7% at $0.93. Best-of-breed NVR (NYSE:NVR) was up 9.3% at $427.91 and Toll Brothers (NYSE:TOL) was up 8.8% to $18.57.

Reporting that "the economy continues to contract," the OMC stated, "Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession."

It also said, "The near-term economic outlook is weak."

The Fed's statement said its decision to buy the additional agency mortgage backed securities and increase it purchases of agency debt were taken "to provide greater support to mortgage lending and housing markets." It also said that its total purchase of these securities could total up to $1.25 trillion this year.

The FOMC said its decision to purchase up to $300 billion of longer-term Treasury securities over the next six months was intended to "improve conditions in the private credit markets."

The OMC said it believes inflation will remain "subdued" but acknowledged some risk that it "could persist for a time below rates that best foster economic growth and stability in the longer term."