Updated from 9:13 a.m. EDT

U.S. stocks opened mixed and were fluctuating wildly Wednesday after the Federal Reserve authorized a 50-basis point reduction in the fed funds rate.

The rate cut, which was coordinated with a rate 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%.

Lately, the major indices were registering gains. The Dow Jones Industrial Average was lately up 44 points to 9491, and the S&P 500 was up 9 points at 1005. The Nasdaq gained 26 points to 1781.

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 skepticism about the real effects of the cut, and that was evident in the selloff in premarket futures. "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 done to reduce lending rates among banks, but designed to offer a psychological boost.

Debt markets have not shown an immediate reaction to the coordinated rate cut, said Mary Ann Hurley, vice president of fixed-income trading at D.A. Davidson. "At this point, it looks minimal," she said, pointing out that one-week Libor remains high at 4.51%, and one-month Libor is at 4.29%.

Furthermore, with one-month Treasury bills still tight, the impact of the rate cut remains questionable, said Hurley. "It's a great psychological tool, having a coordinated easing." However, "I'm definitely hearing more calls for additional rate cuts, which is not surprising."

James Paulsen, chief investment strategist for Wells Capital Management, said the Fed rate cut cannot address the primary problem in the stock market, which is a crisis of confidence.

Paulsen said that there's more of a chance investor fears will be assuaged when the Treasury Department's $700 billion Troubled Asset Relief Program takes effect next week.

On Tuesday, stocks fell hard as credit markets remained tight after an unprecedented Federal Reserve decision to begin buying commercial paper from U.S. businesses.

Pavlik said that Tuesday's selloff was encouraging, and the market may be primed for a short-term bounce. He said that although some companies may offer better-than-expected third-quarter earnings, "The picture is very cloudy for many companies. That's what may temper any bounce going forward." However, he did predict that the S&P 500 will end above 1000 for the year, somewhere between 1100 or 1200.

What's most important, said Paulsen, is that policymakers and leaders show confidence in the economy. "Maybe it's time to tell the market that, "Look, we've done enough. We think there's plenty of liquidity. There's plenty of juice. ... You guys figure this out.'" Paulsen said the market is priced for the worst-case scenario and not the actual current state of the economy. "If we could come down and come back just on confidence, that would do wonders," he said.

Before the internationally coordinated rate cuts, conditions were looking dire Wednesday. As evidence of a worldwide slowdown piled up, European governments struggled to put together their own rescue plans. The U.K. government set up an $87 billion rescue package for U.K. banks.

Stateside, investors faced the final day of trading with the Securities and Exchange Commission's temporary ban on short-selling of more than 900 financial stocks. The moratorium, implemented in mid-September, is set to expire at midnight, and the SEC gave no sign it would extend the ban.

As for company news, The Wall Street Journal reported Citigroup ( C) is looking for partners in its buyout of Wachovia ( WB). Citi and Wells Fargo ( WFC) had earlier agreed to cease their buyout battle for Wachovia until noon Wednesday.

To kick off earnings season, aluminum processor and Dow component Alcoa ( AA) reported a decline in third-quarter profit thanks to rising costs and softening demand.

Bulk retailer Costco ( COST) said its fourth-quarter profit rose year over year, but nevertheless fell short of Wall Street estimates.

Looking at the day's economic data, pending home sales figures from the National Association of Realtors are due out Wednesday, as are weekly oil inventories from the Energy Information Administration.

Over in the commodities arena, crude oil was declining $2.14 to $87.92 a barrel. Gold was advancing $38.80 to $920.80 an ounce.

Longer-dated U.S. Treasuries were climbing. The 10-year was up 12/32 to yield 3.46%, and the 30-year was gaining 1-10/32, yielding 3.96%. The dollar was declining sharply vs. the yen and inching downward against the euro, but gaining on the pound.

Lately, European indices were lower, as the FTSE and the Dax were each dropping at least 4.1%. Asia fared worse; Japan's Nikkei closed down 9.4%, and Hong Kong's Hang Seng dropped 8.2%.

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