NEW YORK (CNN/Money) - The Fed took its bat and ball and went home on Wednesday. Once Wall Street got over its shock, it decided that was a wise move.

The initial reaction to the Federal Open Market Committee's half-point cut in the federal funds rate was widespread confusion -- most traders had thought the Fed would cut by just a quarter point.

Stocks jumped higher when the news first hit the wires, turned tail and sold off deeply and then climbed back. By the closing bell the Fed had done what the election victory of those business-loving Republicans couldn't do earlier: Send stocks into the green.

The Dow finished up 92 points, 1.1 percent, at 8,771, the S&P 500 gained 0.9 percent and the Nasdaq added 1.3 percent.

"I'm shocked by the Fed's move," said Credit Suisse First Boston bond market strategist Mike Cloherty of the move. "It's hard for me to say it all makes sense."

Market expectations had been squarely in favor of a cut of just a quarter, with another quarter-point cut at the Fed's next meeting on Dec. 10. Even economists who had called for a half-point cut were somewhat surprised by the Fed's move. Only rarely has the Fed done what the market expected it to.

"I couldn't believe it -- first time in 10 years they did the right thing," said Arnhold & S. Bleichroeder economic strategist James Padinha. "Obviously, I think it's perfect."

If the Fed had just cut by a quarter point everybody would have been waiting around to see what it would do at its December meeting. This would have kept many consumers and businesses on the fence as they awaited even more favorable rates. Instead, the Fed cut by a half point and, in its statement, said that the risks to the economy are now "balanced."

Translation: Here's your half point and don't look for any more cuts for the foreseeable future.

"They didn't want to do a quarter point and then have everyone wonder all month what they were going to do in December," said Richard Koss, global fixed-income portfolio manager at Brown Brothers Harriman. "The Fed wanted to take itself out of the picture. Merry Christmas, we're done."

One indication of what Wall Street thinks about this move came from the bond market. The yield on the two-year Treasury, which typically moves parallel to the funds rate, actually rose Wednesday. The suggestion is that traders believe the Fed could raise rates again sometime in the first half of next year. That implies an economy that will soon be on more solid footing.

One further implication of the cut is that the Fed is taking more seriously the threat of a Japan scenario emerging in the U.S. In a widely discussed paper published this June, Fed economists argued that one of the Bank of Japan's mistakes was that, while it did eventually bring down overnight rates to an effective zero percent, it did not bring them down fast enough.

"Fed policy makers made a statement that they want to really underpin the recovery," said Morgan Stanley chief U.S. economist Richard Berner. "They've seen the downside risks and they want to make sure that low inflation and disinflation does not morph into deflation."