Stock futures pare losses

NEW YORK (CNNMoney.com) -- Wall Street looked set for losses at Tuesday's open, although the blow is likely to be cushioned after the Federal Reserve stepped in with an emergency rate cut.

The Fed cut rates by three-quarter of a percentage point to 3.5 percent, citing the weakening economic outlook. The move came ahead of the central bank's regularly scheduled meting.

With less than an hour before the market open, stock futures were still sharply lower, although well off their earlier lows. European stocks also surged on the news.

Traders have a busy day as they return to work. U.S. markets were closed Monday for Martin Luther King Jr. Day.

Weighing on futures were steep selloffs in overseas markets, which plunged Monday amid fears that the U.S. slowdown would spill over to the global economy. In Asia, Japan's Nikkei lost another 5.7 percent on Tuesday.

As a recession looms, President Bush and lawmakers from both parties are due to meet Tuesday to discuss a package to juice the faltering economy. Last week, Bush unveiled a stimulus plan worth up to $150 billion.

Treasury Secretary Henry Paulson said Tuesday that Congress and the White House need to act quickly on a package of tax cuts and other measures to boost the economy.

Among stocks to watch, financial stocks are likely to take another hit after Bank of America (BAC, Fortune 500) and Wachovia (WB, Fortune 500) both posted dismal results due to the mortgage and credit mess.

Bank of America's net income sank 95 percent to $268 million in the fourth quarter as the company took $5.3 billion in writedowns related to complex debt instruments. Wachovia's quarterly earnings sank 98 percent to $51 million, and the company took a $1.7 billion writedown.

On the tech front, eBay (EBAY, Fortune 500) CEO Meg Whitman plans to retire, according to a report in the Wall Street Journal. Meanwhile, Yahoo (YHOO, Fortune 500) also is considering cutting hundreds of jobs, according to published reports.

Oil prices fell on recession fears. Crude for February delivery lost $3.21 to $87.36 a barrel in electronic trading.