Wall Street went into reverse with heavy selling on Wednesday as jitters resurfaced over the financial sector a day after a hefty rate cut by the Federal Reserve aimed at boosting market confidence.

The blue-chip Dow Jones Industrial Average slumped 293 points (2.36 percent) to close at 12 099.66, giving back most of a powerful 420-point rally Tuesday.

The tech-dominated Nasdaq composite shed 58.30 points (2.57 percent) to 2209.96 and the Standard & Poor's 500 index tumbled 32.32 points (2.43 percent) to end at 1298.42.

There was no major economic or corporate news to drive the market but a sell-off gained momentum as the session wore on.

A mixed opening fell victim to a wave of late selling on the heels of market drops in Europe amid speculation about liquidity troubles at a major British bank.

"I love my optimistic friends, but I wish they would take a cold shower," said Mary Ann Hurley, analyst at DA Davidson & Co.

"Think about it, this is a boom and bust of historical proportions. This is the biggest housing bubble and biggest credit bubble in history."

Hurley said the Fed's dramatic rate cut of three-quarters of a point will not quickly fix the economic problems stemming from a US housing meltdown that has whipsawed the banking sector.

"An economic Iraq War"

"Housing prices continue to fall. Foreclosures continue to rise. Banks are hurting. The consumer is hurting," she said. "There is more credit murkiness here than any other crisis. The Fed and the government are not sure what will work and what will not. This is like an economic Iraq War; this war will not end anytime soon."

Some analysts said a big slump in commodities highlighted worries about softening economic conditions.

New York's main oil contract, light sweet crude for delivery in April, plummeted 4.94 dollars to close at 104.48 dollars a barrel. Gold also fell sharply.

Oil companies were among the biggest decliners: ExxonMobil tumbled 4.5 percent to 84.46 dollars and Chevron slid 4.9 percent to 81.89.

Helping sentiment at the opening was an announcement by US regulators to allow government-sponsored mortgage firms Fannie Mae and Freddie Mac to pump an extra $200-billion into the troubled housing market.

Fannie Mae shares surged 9.6 percent to 30.92 and Freddie Mac leapt 14.5 percent to 29.80.

Meanwhile the biggest public share offering in US history got off to a sizzling debut as Visa Inc. share soared 28.4 percent from the offering price to 56.50 dollars for the credit card payments giant.

But others in the financial sector were hurting. Lehman Brothers skidded 9.2 percent to 42.23 dollars and Citigroup lost 1.45 percent to 20.41 on worries about the sector. Morgan Stanley managed a gain of 1.4 percent to 43.45 after the investment firm reported a profit that topped most expectations despite the turbulence in credit and mortgage markets.

Bonds benefited from the renewed turmoil. The yield on the 10-year US Treasury bond dipped to 3.362 percent from 3.451 percent Tuesday and that on the 30-year bond fell to 4.222 percent against 4.329 percent. Bond yields and prices move in opposite directions.

AFP