US STOCKS-Fed's emergency rate cut spooks Wall Street

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* Indexes down: Dow 1.57%, S&P 1.30%, Nasdaq 1.28%
* Fed cuts rates by half percentage point
* Concerns about virus impact still dominate

(Adds details, updates prices)
By Medha Singh
March 3 (Reuters) - Wall Street tumbled in a volatile
session on Tuesday after the Federal Reserve's surprise half
percentage-point cut in interest rates raised alarm over the
magnitude of the coronavirus impact on the economy.
It was the Fed's first emergency rate cut since the 2008
financial crisis, underscoring how grave the central bank views
the fast-evolving situation.
The rate reduction 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 later fell 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 market reaction now is negative because the Fed sent
the wrong message to the market," said Peter Cardillo, chief
market economist at Spartan Capital Securities in New York.
"All of a sudden the Fed is really worried about the economy
and this is the reason why we are having this volatility."
Bank stocks .SPXBK , which tend to outperform when
interest rates are higher, dropped 3.4%, while the broader
financials .SPSY sector fell 2.6%.
Wall Street closed Friday with 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.
All three major indexes entered correction territory,
implying a 10% drop from record highs. Many investors will
consider an index to remain in a correction until it reclaims
its peak.
"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."
Earlier in the day, Group of Seven finance ministers and
central bank governors had pledged appropriate actions to
support the economies. At 12:57 p.m. ET, the Dow Jones Industrial Average .DJI
was down 418.83 points, or 1.57%, at 26,284.49, while the S&P
500 .SPX was down 40.32 points, or 1.30%, at 3,049.91. The
Nasdaq Composite .IXIC was down 114.17 points, or 1.28%, at
8,838.00.
Seven of the 11 major S&P sectors were trading lower. Real
estate .SPLRCR and utilities .SPLRCU , commonly considered
defensive sectors, were the outperformers.
Healthcare equipment maker Thermo Fisher Scientific TMO.N ,
rose 3.3% after it launched a $11.6 billion bid for German
genetic testing company Qiagen QIA.DE .
Advancing issues outnumbered decliners by a 1.15-to-1 ratio
on the NYSE, while declining issues outnumbered advancers for a
1.40-to-1 ratio on the Nasdaq.
The S&P index recorded two new 52-week highs and six new
lows, while the Nasdaq recorded 16 new highs and 78 new lows.