The Nasdaq composite index dropped 93.74 points to end the session at 1,857.44. The blue chip Dow Jones industrial average slid 238.35 points to 9,720.76. The S&P 500 dropped 28.19 points to 1,142.62.
The Federal Open Market Committee's rate cut was a letdown for many stock market investors, who had been hoping the Fed would approve a deeper rate cut to lift the struggling equity market.
"The market will be slightly disappointed short-term that they did not get 75 points. I don't think it will be terrible, but the odds of getting a rally have been choked off right here," said Uri Landesman, chief investment officer at AFA Management Partners, of Greenwich, Conn.
The fall in stocks was partly cushioned after the powerful Fed, citing the risk of further economic slowing through lower investment and consumer spending, signaled that it stood ready to cut rates some more in coming months. Many market watchers were hoping regulators would place more weight on the stock market's recent decline, but the Fed's refusal to make a deeper cut indicates Greenspan remains mainly concerned with larger economic indicators.
"I think the Fed made clear in its statement they are primarily concerned with fundamentals and not necessarily with equities," said Carl Tannenbaum, chief economist at Lasalle Bank in Chicago.
The rate cut marked the third time this year the central bank has lowered borrowing costs, each time by a half-percentage point.
Among the most active technology stocks, Cisco Systems dropped $1.75 to $19.06, Oracle fell $1.06 to $14.38, Intel yielded $2.44 to $24.63, Sun Microsystems slid $1.69 to $17.38, Microsoft retreated $1.63 to $52.69 and Lucent Technologies fell 77 cents to $11.20.
Solectron on Tuesday fell $2.44 to $19.05 following Monday's announcement that it expects to miss analysts' third-quarter estimates by more than half and plans to cut over 8,000 jobs. Analysts said the company's sudden reversal of fortune didn't bode well for its competitors.
Other contract equipment manufacturers to get downgraded by analysts Tuesday include Flextronics, down $4.38 to $19; Celestica, down $6.64 to $31.01; Jabil Circuit, down $2.31 to $18.10; Plexus, off $3.19 to $26.38; Sanmina, down $4.50 to $24; and SCI Systems, down $2.97 to $16.97.
In other profit warnings, analysts revised earnings estimates for semiconductor equipment maker KLA-Tencor. Its shares were down $3.38 to $38.38 in the wake of the company's fiscal third-quarter profit warning, but analysts noted that KLA-Tencor can work through an economic slowdown.
Progress Software, down $1.13 to $13.81, reported first-quarter earnings in line with analysts' expectations, but it said revenue fell short amid a slower economy.
Staff and Reuters contributed to this report.