Stocks Sink Despite Global Rate Cuts

Updated from 4:11 p.m. EDT

U.S. stocks finished a hectic Wednesday on the downside after the Federal Reserve authorized an emergency 50-basis point reduction in the fed funds rate.

The rate cut, which was coordinated with a similar cut by the European Central bank as well as lenders in Britain, Canada, Sweden and Switzerland, marks a significant step in efforts to stem a global economic slowdown and free up constrained credit markets. The Fed's rate cut reduces the target interest rate to 1.5%. The ECB reduced its key rate half a point to 3.75%, and the Bank of England cut rates 50 basis points to 4.5%.

The Dow Jones Industrial Average, which traded erratically in a 433-point range during the day, ended down 189.01 points, or 2%, to 9258.10, marking another five-year record-low close. The S&P 500 lost 11.29 points, or 1.1%, to 984.94, and the Nasdaq fell 14.55 points, or 0.8%, to 1740.33.

Robert Pavlik, chief investment officer at Oaktree Asset Management, said that the rate cut will have a positive effect on markets, but that it's going to be partially psychological, giving hope and confidence to consumers by reducing some of their costs.

Pavlik also said there's also skepticism about the real effects of the cut, and that was evident in the selloff in premarket futures following the Fed's announcement. "I think the market is more focused on what's going on in the Libor rates," he said. He said that the rate cut wasn't made to reduce lending rates among banks, but designed to offer a psychological boost.

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