(Agencies)
Updated: 2008-01-23 09:02

NEW YORK -- The opening bell hadn't even sounded on Wall Street when the Federal Reserve announced an emergency interest-rate cut. The Dow Jones industrial average fell 465 points -- including 300 in the first minute -- then rebounded to finish down a more bearable 128.

The main trading floor of the New York Stock Exchange is seen in this photo made by zooming the lens during exposure Tuesday Jan. 22, 2008. [Agencies]

The recovery Tuesday was a victory of sorts for a battered market. But a long-term comeback may depend on factors much more difficult to achieve -- a turnaround in the housing market and renewed confidence among US consumers, who hold up most of the economy.

The alarming early drop in US stocks followed the lead of markets abroad, where investors fled stocks and sent indexes plummeting on fears of a US recession that could spread to other global economies.

By the close, the Dow had recovered to a loss of 128.11, or just over 1 percent, at 11,971.19.

Before trading began, the Federal Reserve moved to slash its benchmark federal funds rate by 0.75 percentage points, to 3.5 percent. It was the widest cut since 1990, the beginning of what the Fed says is a comparable period in the way it handled the rate.

The Fed cut the discount rate, the interest rate the Fed charges banks directly, to 4 percent, also a three-quarter-point cut.

Many traders had anticipated a rate cut, but it was unusual for the Fed to make the call between regularly scheduled meetings of its policy-making Open Markets Committee.

The next meeting is a week away, and even then, most traders were expecting a cut of only a half-point.

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