U.S. stock markets recovered most of their heavy early losses on Tuesday after the Federal Reserve announced an emergency cut in its benchmark lending rate before the markets opened.

The unscheduled move to lower the Fed funds rate was prompted the threat of a possible U.S. recession. The Fed cut the overnight rate commercial banks can charge each other by 0.75 percent to 3.5 percent. It was the first time since September 17, 2001, days after the September 11 attacks, that an emergency meeting was called.

The Standard & Poor's 500 Index which measures a broad spectrum of U.S. stocks was down 1.17 percent, or 15.46 points to 1,309.73 at 1:32 p.m. in New York. The Dow Industrial Average of 30 major U.S. corporations was down 1.03 percent, or 124.29 points to 11,975.01. The technology heavy Nasdaq Composite Index fell 1.73 percent, or 40.45 points to 2,299.57.

At the open of trading today, the market immediately plunged, sending the down lower by 465 points

Financial stocks gained on the Fed's move. The Nasdaq Financial 100 index of 100 major financial companies rose 1.7 percent, or 42.14 points to 2,532,84.

Bank of America shares, had a volatile early start but rose strongly, up 4.1 percent, or 1.46 points to 37.43 in early afternoon trading. The bank reported that fourth quarter earnings fell 95 percent. The earnings of 5 cents per share, or $268 million came in below estimates of 18 cents per share, according to a poll of analysts from Thomson Financial.

In Europe, shares rose after the announcement. The Dow Jones STOXX 600 of European companies rose 2.2 percent, or 6.78 points to 315.55.

Stocks in Asia, which closed before the Fed's announcement were down heavily again. The MSCI Asia Pacific Index fell 6.5 percent.

Japan's Nikkei Index of 225 companies fell 5.7 percent, or 752.89 points to 12, 573.05. Hong Kong's Hang Seng Index plunged 8.65 percent, or 2,061.23 points to 21,757.63. India's Sensex 30 Index was down 5 percent, or 875.41 points to 16,729.94.