TORONTO (Reuters) - The main index of the Toronto Stock Exchange soared almost 200 points in a broad rally yesterday as investors cheered a hefty half-percentage point interest rate cut in the United States.

The S&P/TSX composite index rose 195.54 points, or 1.42 percent, to close at 14,005.40 - its highest level since the end of July.

The S&P/TSX 60 index of Canadian bluechips rose 12.54 points to end at 814.10.

The session's big jump came after the US Federal Reserve announced it would bring down the benchmark federal funds rate to 4.75 percent, its lowest level since May of last year.

The move, designed to shield the US economy from a housing slump and related turbulence in debt and equity markets, gave an immediate lift to stocks on both sides of the border.

"Obviously, we live beside a giant and when the giant moves, we move with it," said Glenn MacNeill, vice-president of investments at Sentry Select Capital Corp.

All of the benchmark index's 10 main groups finished the day higher. Energy added 1.64 percent, financials rose 1.27 percent and materials jumped 1.94 percent.

Commodity prices also did not disappoint, with US gold futures hitting a 28-year high in electronic trade and oil surging to a peak of more than $82 a barrel. Both moves were attributed to the Fed rate cut.

This made for more gains for energy and mining shares on the Toronto market. Suncor Energy added C$2.34, or 2.4 percent, to finish at C$101.05 and EnCana Corp rose 97 Canadian cents, or 1.5 percent, to finish at C$64.81.

Teck Cominco jumped C$1.83, or 4.2 percent, to close at C$45.46. Agnico-Eagle Mines shot up C$1.51, or 3.1 percent, to end at C$50.75.

Market watchers had widely anticipated the Fed would cut rates, but were split on whether the cut would be 50 or 25 basis points.

However, some still continued to question whether the rate reduction will do much to alleviate the wild swings in the markets that have recently tested investors' nerves.

"In my view, it's unlikely that this is going to be the start of a new bull leg upwards," said Elvis Picardo, investment strategist at Northern Securities Inc in Vancouver.

"I still think the markets are going to be quite volatile in the weeks ahead."

In the United States, the stock market reaction to the rate cut was even more pronounced, with the Dow Jones industrial average rising 335.97 points, or 2.51 percent, to finish at 13,739.39. The tech-heavy Nasdaq also rallied, adding 70 points, or 2.71 percent, to 2,651.66.