NEW YORK (Reuters) -- Wall Street tumbled in a volatile session on Tuesday after the U.S. Federal Reserve surprised investors with a half percentage-point cut in interest rates, amplifying fears about the magnitude of the coronavirus' impact on the economy.
All three major U.S. stock market indexes closed nearly 3% lower after the Fed's first emergency rate cut since the 2008 financial crisis.
The rate reduction underscored the U.S. central bank's concern about the new coronavirus, which has spread around the world after emerging late last year in China. It came two weeks ahead of a scheduled policy meeting, where traders had fully priced in a 50-basis-point cut.
Stocks had initially jumped more than 1%, but then dropped as traders worried whether pumping more money into financial markets would address the central problem - a drop in business activity as workers and consumers stay home.
"The rate cut underscores the magnitude of the problem that the global economy is facing," said Peter Kenny, founder of Kenny's Commentary LLC and Strategic Board Solutions LLC in New York.
"Normally, markets would welcome a rate cut, and they were hoping for it. Now that we've got it, the question is, what's next?"
The 10-year Treasury yield fell below 1% for the first time ever as nervous investors moved money out of the stock market.
The S&P financials index tumbled 3.7%, reflecting banks' difficulty in making profits in low-interest rate environments.
Wall Street on Friday had its biggest weekly decline in more than a decade as growing cases of the flu-like virus outside China fanned fears of a global recession.
Earlier on Tuesday, Group of Seven finance ministers and central bank governors pledged appropriate actions to support their economies.
"There is a real fear that things are going to get worse and there is no point in waiting for these fears to be realized," Jim Bianco, president of Bianco Research in Chicago, said of the Fed's rate cut. "You can always undo the rate cut if it fails to materialize."
The Dow Jones Industrial Average dropped 2.94% to end at 25,917.41 points, while the S&P 500 lost 2.81% to finish at 3,003.37.
The Nasdaq Composite descended 2.99% to 8,684.09.
Like other recent sessions, volume was heavy on U.S. exchanges, with 14.7 billion shares changing hands compared with a 9.8 billion-share average for the last 20 days.
All of the 11 major S&P sectors fell, with the information technology index slumping 3.8%. Apple and Microsoft fell 3.2% and 4.8%, respectively.
Tuesday's sell-off left the S&P 500 down about 11% from its record high close on Feb 19.
Healthcare equipment maker Thermo Fisher Scientific, rose 1.8% after it launched an $11.6 billion bid for German genetic testing company Qiagen.
Protective mask maker Alpha Pro Tech jumped nearly 20%.
Declining issues outnumbered advancing ones on the NYSE by a 1.67-to-1 ratio; on Nasdaq, a 2.45-to-1 ratio favored decliners.
The S&P 500 posted two new 52-week highs and 32 new lows; the Nasdaq Composite recorded 19 new highs and 185 new lows.