U.S. stocks plunged on Wednesday after earlier rallies in response to the Federal Reserves highly anticipated half-point rate cut and on speculation that bond insurers Ambac Financial and MBIA Inc. faced downgrades.

The Dow Jones Industrial Average was down about 30 points ahead of the Fed decision but rallied nearly 200 points before falling again on the closing bell to finish 37.5 points lower to 12,442.8. The S&P 500 fell 6.49 points, or 0.5 percent, to 1,355.81, while the technology-loaded Nasdaq Composite dropped 9.06 points, or 0.4 percent to 2,349.00.

As an inflationary move, the Fed cut its benchmark federal funds rate by a widely expected half percentage point, after cutting the rate last week by three-quarters of a percentage point. The Fed made the cut in a bid to stave off a U.S. recession. The Dow has gained over 500 points, or 4.1 percent, since the three-day weekend that followed Tuesday's unexpected Fed cut.

Ambac Financial Group Inc. and MBIA Inc., the largest U.S. bond guarantors, pushed the stocks further after Fitch Ratings withdrew its top ranking on Financial Guaranty Insurance Co.

Ambac fell $2.08, or 16 percent, to $10.85. MBIA tumbled $2.02, or 13 percent, to $13.96.