NEW YORK (AFP) - US stocks skidded but averted a meltdown Tuesday amid a global financial market panic that prompted an unprecedented 75-basis-point rate cut by the Federal Reserve.
The Dow Jones Industrial Average slid below 12,000 points for the first time since November 2006 but rebounded from its worst levels, ending with a loss of 128.11 points (1.06 percent) at 11,971.19.
The tech-heavy Nasdaq slumped 47.75 points (2.04 percent) to 2,292.27 and the broad-market Standard & Poor's 500 index shed 14.69 points (1.11 percent) to close at 1,310.50 as the New York market saw its fifth straight losing session.
The Fed announcement of a surprise cut, the biggest since it began using the federal funds rate as a policy tool, helped stem heavy losses in European markets. In New York, the market came off its lows at the opening but failed to gain traction.
The Fed announcement "failed to ease investor concerns that the US, and possibly the global economy, may already be in a recession," said Al Goldman at AG Edwards.
Since Monday, global markets were in a freefall amid worries that the US economy is moving into a recession that would hit the rest of the world.
European exchanges on Monday suffered their biggest one-day falls since the September 11, 2001, attacks on the United States.
On Tuesday, the main European indexes rallied after news of the Fed action while Asian markets, which closed before the Fed announcement, plummeted for a second straight day. Tokyo dropped 5.6 percent, China's main index shed 7.22 percent, Sydney plunged 7.1 percent, and Indian share prices closed down 4.97 percent.
Wall Street market action came after the US central bank cut its base federal funds rate to 3.50 percent early Tuesday in an effort to stem a global financial crisis related to a collapse of the US property market.
"This major move might seem like a panic response to the plunge in stock prices, but it also makes sense," said Dick Green at Briefing.com.
"The markets are in a panic, and the Fed needed to respond in kind."
Markets have been disappointed by the economic stimulus plan proposed last week by US President George W. Bush and see the White House action as confirmation that the world's biggest economy is headed for trouble.
Kevin Giddis, bond market analyst at Morgan Keegan, said the Fed's emergency move and the White House rush to pass a stimulus package are signs that economic troubles are not yet over.
"These are not the things you typically do when you are not in, or feel strongly about, a recession," Giddis said.
"If we are indeed in a recession, it will take the Fed, the Treasury and all branches of the US government to act swiftly and decisively to head off a major economic headache. This might include bailing out a few banks and insurers too."
Some analysts said the stocks rout may be part of a climactic selloff that signals a market bottom.
"From an investment perspective, major damage has been done to the equity markets, and over the past few weeks, technical factors and investor psychology have been driving the markets more than fundamentals have been," said Bob Doll at BlackRock.
"We believe stock prices will need to go through a bottoming-out process before the next significant upswing can occur, and we think we may be close to some sort of low point from a technical perspective, given the oversold nature of the market."
The bond market rallied amid the turmoil in stocks. The yield on the 10-year US Treasury bond fell to 3.484 percent from 3.648 percent Friday while that on the 30-year bond eased to 4.227 percent against 4.297 percent. Bond yields and prices move in opposite directions.
Among key stocks, Bank of America rose 4.0 percent to 37.41 dollars as the biggest US banking group by market value reported a profit of 268 million dollars in the fourth quarter despite a big writeoff for real estate losses.
United Airlines fell 3.2 percent to 31.87 after a disappointing quarterly profit report.
Ambac, the troubled bond insurer, rallied 27 percent to 7.90 after announcing a 3.2 billion dollar quarterly loss but indicating it was considering "strategic alternatives," which could mean a sale or merger.
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