( dpa ) - Stocks fell on Wall Street Wednesday after possible credit rating downgrades if bond insurers spooked investors already worried about the US economy despite an interest rate cut by the US central bank that caused a mid-afternoon rally.
The Federal Reserve dropped interest rates half a point, to 3 per cent, citing the stress in financial markets, plunging housing values and climbing unemployment just a week after an emergency reduction of 0.75 points.
"The Fed's trying to do what it can, and it looked like it excited people for a little while," Barry James of James Investment Research in Dayton, Ohio told Bloomberg financial news. "But things keep coming back in to show things are definitely weakening."
Bloomberg reported that after gains of up to 1.7 per cent on the Standard & Poor's 500 Index after the Fed announcement, bond insurers Ambac Financial Group Inc and MBIA Inc pulled shares back down.
Also Wednesday, the government said economic growth slumped in the fourth quarter to 0.6 per cent as home construction and vehicle output plunged and consumer spending cooled. In comparison growth in the third quarter was a robust 4.9 per cent, US commerce officials said, and the fourth quarter figure pulled down annual growth for 2007 to about 2.2 per cent, the lowest in five years.
The blue-chip Dow Jones Industrial Average slipped 37.47 points, or 0.3 per cent, to 12,442.83. The broader S& P 500 lost 6.49 points, or 0.5 per cent, to 1,355.81. The technology-heavy Nasdaq Composite Index was down 9.06 points, or 0.4 per cent, to 2,349.00.
The US currency fell against the euro to 67.22 euro cents from 67.66 euro cents on Tuesday. The dollar was down against the Japanese currency at 106.56 yen from 107.10 yen.
Gold picked up 4.90 dollars to 935.70 dollars per fine ounce in New York.