Market falls on recession concern but Fed cut helps

By Caroline Valetkevitch

NEW YORK (Reuters) - Recession worries pushed U.S. stocks lower on Tuesday, but the decline was shallower than feared at first as an emergency interest-rate cut by the Federal Reserve helped ease investor fears and stabilize global markets.

Declines were fairly broad-based, with Procter & Gamble Co, the world's largest household products company, down 2.4 percent at $65.51, and Exxon Mobil, down 2.5 percent at $82.98, among the biggest falling shares in both the Dow industrials and S&P 500. Exxon Mobil is the largest publicly traded U.S. oil company.

But investors bought financial stocks, which benefit from lower borrowing costs, as well as retailers. The financial sector was among the S&P 500's major gainers, while retailers led gains on the Dow.

Shares of Bank of America Corp rose 3.4 percent to $37.19.30. The second-largest U.S. banking company reported a 95 percent drop in quarterly earnings, but its CEO said he does not expect to cut the bank's dividend.

"We're not out of the woods yet ... We're still down on the day ... (but) clearly the Fed rate-cut move was well received by traders this morning," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles. "At least it was an attempt by the Fed to get in front of the negativity."

The Dow Jones industrial average was down 136.40 points, or 1.13 percent, at 11,962.90. The Standard & Poor's 500 Index was down 13.92 points, or 1.05 percent, at 1,311.27. The Nasdaq Composite Index was down 40.19 points, or 1.72 percent, at 2,299.83.

Home builders also were in positive territory after the Fed cut interest rates by 75 basis points in an unusual decision between its regularly scheduled policy meetings. The Federal Open Market Committee is set to meet next Tuesday and Wednesday.

The U.S. central bank's move followed two days of steep losses in Asian and European equities on worries that a deteriorating U.S. economy would drag other regions down with it.