Updated from 10:00 a.m. EDT

U.S. stocks were fluctuating wildly Wednesday after the Federal Reserve authorized an emergency 50-basis point reduction in the fed funds rate.

The rate cut, which was coordinated with a 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 taking losses. The Dow Jones Industrial Average was lately down 140 points to 9307, and the S&P 500 was off 13 points at 982. The Nasdaq gave back 14 points to 1741.

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%.

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