US STOCKS-Wall St set for slide at open; Fed cuts rates

(Updates with details, reaction to Fed rate cuts, updates prices)

By Kristina Cooke

NEW YORK Jan 22 (Reuters) - U.S. stocks headed for a slide at the open on Tuesday as fear of a recession gripped investors, prompting the Federal Reserve to slash benchmark U.S. interest rates by 75 basis points in a surprise intermeeting decision.

Futures cut some of their losses after the move from the U.S. central bank, which follows sharp losses in global equities on worries a deteriorating U.S. economy would drag other regions down with it.

The rate cuts "should moderate the decline but frankly I think we're in for a forced liquidation phase which has further to run," said Michael Metz, chief investment strategist at Oppenheimer & Co in New York.

"The Fed is obviously panicked, but unfortunately they have no power to reverse what in my opinion is the worst post-war recession."

Dow Jones industrial average futures DJc1 dropped 381 points. S&P 500 futures SPc1 were down 48.80 points, far below fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Nasdaq 100 NDc1 futures slid 56.50 points.

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.

Weaker-than-expected earnings from Bank of America (BAC.N) and Wachovia Corp WB.N, the second- and fourth-largest U.S. banks, respectively, added to the grim mood on Wall Street.

Bank of America's stock fell 5.3 percent to $34.06 before the opening bell while Wachovia fell 3.4 percent to $29.75. (Additional reporting by Jennifer Coogan; Editing by Kenneth Barry)