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Wall Street lost midday gains Wednesday, as investors worried that a half-point cut in interest rates would not be enough to fix an economic downturn.

This story first appeared in the January 31, 2008 issue of WWD.  Subscribe Today.

The Dow Jones Industrial Average momentarily spiked 0.6 percent after the Federal Reserve announcement, but lost 0.3 percent for the day, closing at 12,440.96, while the S&P 500 fell 0.5 percent to 1,355.56.

After a short-lived rally retail shares sank, with the S&P Retail Index losing 1.1 percent to 405.46.

High-end department store Nordstrom Inc. dropped 3.8 percent to $36.73. Gap Inc. shed 3 percent to $18.32. Tween Brands fell 4.8 percent to close at $31.07, while teen retailer Aéropostale Inc. slid 2.5 percent to $26.12. Wal-Mart Stores Inc. was one of the few retailers able to hang onto gains, ending the day up 0.3 percent to $49.14.

Action sports apparel retailer Zumiez Inc. jumped 2.8 percent to $17.80, while Coldwater Creek Inc. increased 3.8 percent to close at $5.72.

But the biggest gainer was Stein Mart Inc., soaring 10.1 percent to $6.08, after its chairman announced he would purchase 111,400 shares of the company.

Earlier in the day, the Fed lowered the benchmark federal funds rate to 3 percent, its second cut in two weeks.

In a release, the Fed said, “Today’s policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain.”

Retailers and investors also are looking for a boost from an economic stimulus package being crafted in Washington that contains tax rebates aimed at putting money in consumers’ hands by June. The Senate Finance Committee passed a $161.3 billion package Wednesday that is broader than a plan backed by President Bush and passed by the House on Tuesday.

The Senate bill could go to the full chamber for a vote by the end of the week. If the Senate passes its bill, the differences between the Senate and House measures will have to be reconciled in a conference committee before it can move to the president’s desk. President Bush has said the bill could be delayed or derailed if the Senate makes too many changes to the compromise legislation he struck with House leaders.