In an effort to stabilize the economy, the Federal Reserve slashed the federal funds rate by three-quarters of a percentage but the size of the cut confirmed investor fears of a recession. The Dow plunged 128 points to 11,971 while Nasdaq plummeted 48 points to 2292.

On the upside

Fourth quarter earnings rose to beat expectations for Fastenal (Nasdaq: FAST) as the construction supply retailer cut costs.

Lower expenses boosted third quarter earnings for PetMed Express (Nasdaq: PETS) to surpass estimates by four cents.

Former Hollywood Entertainment CEO Mark J. Wattles purchased a 6.5% stake in Cirucuit City (NYSE: CC).

On the downside

Although Waters (NYSE: WAT) reported higher fourth quarter earnings, the results fell short of expectations and the company forecast 2008 results below estimates.

Goldman Sachs analyst Tim Boddy downgraded Alcatel-Lucent (NYSE: ALU).

Sallie Mae (NYSE: SLM) will no longer make loans to subprime student borrowers attending Career Education Corp. (Nasdaq: CECO).

In the broad market, declining issues outpaced advancers by a margin of more than 4 to 3 on the NYSE and by more than 2 to 1 on Nasdaq. The Russell 2000 which tracks small cap stocks slipped 2 points to 672.