U.S. markets joined stock exchanges around the globe that have
fallen precipitously in recent days amid concerns that a downturn
might spread around the world.
The Fed's decision to cut its federal funds rate to 3.50 percent and the discount rate, the interest it charges to lend directly to banks, came a week before the central bank's regularly scheduled meeting, a sign that the Fed recognized the seriousness of the world financial situation.
In the opening minutes of trading, the Dow was down 400 points at the 11,698 level. It last was below 12,000 in March 2007.
It was the first time the Fed altered the target federal funds rate between scheduled meetings since the markets reopened after
the Sept. 11, 2001 terrorist attacks. The cut was the biggest one-day rate move by the Fed since it lowered rates by a full percentage point in December 1991, when the country was trying to emerge from recession.
The Fed said in a statement that it took the steps to address a "weakening of the economic outlook" and "increasing downside
risks to growth." The bank also said it will act in a timely way
to address future risks.
"They seemed to react to the markets rather than anticipate the
markets, but they did the right thing," said economist Edward
Yardeni, who runs his own research firm.