(Updates to midafternoon)
By Caroline Valetkevitch
NEW YORK, Jan 22 (Reuters) - Recession worries pushed U.S.
stocks lower on Tuesday, but the decline was shallower than
feared at first as an emergency interest rate cut by the
Federal Reserve helped to ease investor fears and stabilize
global markets.
Declines were fairly broad-based, with Procter & Gamble Co
<PG.N>, the world's largest household products company, down
2.6 percent at $65.40 and Exxon Mobil <XOM.N>, down 2.2 percent
at $83.21, among the biggest falling shares in both the Dow
industrials and S&P 500.
But investors bought financial stocks, which benefit from
lower borrowing costs, as well as retailers. The financial
sector was among the S&P 500's major gainers, while retailers
led gains on the Dow.
Home builders also were in positive territory after the Fed
cut interest rates by 75 basis points in an unusual decision
between its regularly scheduled policy meetings. The Federal
Open Market Committee is set to meet next Tuesday and
Wednesday.
The U.S. central bank's move followed two days of steep
losses in Asian and European equities on worries that a
deteriorating U.S. economy would drag other regions down with
it.
"We're not out of woods yet... We're still down on
day...(but) clearly the Fed rate-cut move was well received by
traders this morning," said Michael James, senior trader at
regional investment bank Wedbush Morgan in Los Angeles. "At
least it was an attempt by the Fed to get in front of the
negativity."
The Dow Jones industrial average <> was down 117.95
points, or 0.97 percent, at 11,981.35. The Standard & Poor's
500 Index <.SPX> was down 14.74 points, or 1.11 percent, at
1,310.45. The Nasdaq Composite Index <> was down 39.53
points, or 1.69 percent, at 2,300.49
The Dow was down almost 465 points at its session low,
while the Nasdaq, within minutes of the opening bell, dropped
to a level indicating it had crossed the threshold of what is
considered a bear market -- a fall of 20 percent from its
October closing high.
Overseas stock losses were sharp on Monday when U.S.
markets were closed for the Martin Luther King Jr. holiday, and
the rout resumed on Tuesday until the Fed rate cut, which
helped Latin American markets to rise and allowed the
pan-European FTSEurofirst 300 index <> to end up 1.9
percent.
The Fed's action took the key federal funds rate, which
governs overnight lending between banks, down to 3.5 percent,
its lowest level since September 2005. The Fed also lowered the
discount rate it charges on direct loans to banks to 4
percent.
The S&P index of retailers <.RLX> rose 4.4 percent, the Dow
Jones U.S. home construction index rose <.DJUSHB> 3.5 percent,
while the S&P financial index <.GSPF> advanced 1.8 percent.
The price of U.S. oil futures dropped below $90 a barrel,
weighing on Exxon Mobil and rivals ConocoPhillips <COP.N>, down
2.7 percent at $70.95, and Chevron <CVX.N>, down 2.3 percent at
$81.56. Oil prices, however, had risen off session lows after
the Fed's rate cut spurred hopes that it will help the U.S.
economy and keep demand for oil strong.
Shares of iPod and iPhone maker Apple Inc <AAPL.O> were the
biggest drag on the Nasdaq, down 2 percent at $158.30.
(Editing by Kenneth Barry)
