US stocks end lower

Close US stocks dropped as the Standard & Poor's 500 Index lost a 3.1% rally in the final 12 minutes of trading on concern that the Federal Reserve's sixth interest- rate cut this year isn't enough to rescue the economy.

Intel, JPMorgan Chase and Citigroup led declines in the Dow Jones Industrial Average, falling more than 4%. The central bank lowered its rate target by half a point to 1%, a level matching a half-century low, and said ``downside risks to growth remain.''

``The Fed was saying that a recession is in place and that a global recession is unfolding,'' said Quincy Krosby, who helps manage $US416 billion as chief investment strategist at the Hartford in Hartford, Connecticut. ``There was nothing in the statement suggesting anything different than what every economist has acknowledged, which is that there's a global slowdown, the consumer is under pressure and businesses aren't spending.''

The Standard & Poor's 500 Index lost 10.42 points, or 1.1%, to 930.09, one day after surging 11%. The Dow average slumped 74.16, or 0.8%, to 8,990.96. Nasdaq ended 0.5% higher, gaining 7.7 points to 1,657. Three stocks gained for every two that fell on the New York Stock Exchange.

Australian markets were recently pointed higher. The SPI Futures were 33 points, or about about 0.8% higher, at 3881. The main S&P/ASX200 share index yesterday rose 1.3%, snapping five days of falls.  The Australian dollar extended its recovery, recently buying 67.34 US cents and 65.6 yen.

The Fed has reduced the rate from 5.25% in the past 13 months and created six lending programs channeling more than $US1 trillion into the financial system.

The Commerce Department probably will report tomorrow that the economy shrank at a 0.5% annual rate in the third quarter, the most since the 2001 recession, economists predict.

Stocks gyrate

US stocks swung between gains and losses before the Fed decision as a decline in orders for US durable goods excluding transportation offset prospects for lower borrowing costs. The London interbank offered rate, or Libor, for three-month dollar loans dropped 5 basis points to 3.42%, while central banks in China and Norway lowered interest rates.

``We are at the beginning of a very severe US recession; it's going to be much more painful,'' New York University professor Nouriel Roubini said in an interview with Bloomberg Television. ``There are still significant downside risks to equity markets and credit markets.''

Roubini, who predicted the current financial crisis in 2006, said the S&P 500 may fall as much as 30% during a two-year economic contraction. The Fed will probably cut its interest-rate target close to zero during that time, he said.

US stocks soared on Wednesday with the Dow average jumping 11%, the sixth-best performance in the 112-year-old measure's history, as the cheapest valuations in 23 years lured investors and increased commercial paper sales signaled credit markets are thawing. The S&P 500 also added 11%, trimming its monthly decline to 19% and its yearly loss to 36%.

$US12 trillion lost

Equities around the world tumbled this month, wiping out more than $US12 trillion ($18 trillion) of market value, after money markets froze, banks' credit losses grew and economic growth weakened. All 48 of the developed and emerging markets tracked by MSCI have declined in 2008, with 20 losing at least half their value.

Companies in the S&P 500 that reported third-quarter profit so far posted an 18% decline on average, according to data compiled by Bloomberg. A drop for the entire index would mark the fifth straight quarterly slide, the longest stretch since the dot-com bubble burst at the start of this decade.

Investors speculating on a rebound in US stocks may have a better chance in the first year of a Barack Obama presidency than a John McCain administration, if election history is any guide.

Since 1900, the Dow Average rose 9.8% in the 12 months after the Democratic Party captured the White House, based on the median change following the election of seven Democrats from Woodrow Wilson to Bill Clinton. Among newly elected Republicans, five -- including Herbert Hoover, Richard Nixon and George W. Bush -- preceded stock-market declines, with a median retreat of 2.5% for all 10, Bloomberg data show.

Stocks gained in Europe and Asia for a second day as falling credit costs spurred a rally in financial shares, while higher commodity prices pushed up oil and metals producers.

Bloomberg News with BusinessDay