NEW YORK » Wall Street finished moderately lower yesterday, as further signs of economic deterioration dampened investors' earlier enthusiasm about the Federal Reserve's record interest rate cut.

Stocks declined in the early going after a larger-than-expected loss from Morgan Stanley offered fresh evidence of the sizable obstacles the battered financial industry still faces. The report came a day after rival Goldman Sachs Group Inc. posted its first quarterly loss since going public in 1999.

After briefly moving into positive territory, stocks struggled to hold on to the big gains logged the day before as investors grappled with signs of a worsening economy, including more layoffs, and the magnitude of the Fed's actions, aimed at boosting borrowing and lending.

The Dow Jones industrial average fell 99.80, or 1.12 percent, to 8,824.34, after falling as many as 146 points earlier in the session. The Standard & Poor's 500 index slipped 8.76, or 0.96 percent, to 904.42, and the Nasdaq composite index fell 10.58, or 0.67 percent, to 1,579.31.

The Russell 2000 index of smaller companies was up 3.74, or 0.77 percent, to 486.59.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where consolidated volume came to a light 5.18 billion shares, down from 5.81 billion shares on Tuesday.

Volume will likely remain light for the remainder of the year as investors break for the holidays. Light volume tends to skew the market's movements, and could increase volatility in the coming sessions, analysts said.

The central bank on Tuesday lowered its federal funds rate target to a range of zero to 0.25 percent—the lowest levels on record.

That action is expected to lower rates on everything from home equity loans to credit card loans. Meanwhile, mortgage rates are falling after the Fed renewed its pledge to buy up billions of dollars of mortgage debt.

But many experts believe that the interest rate cuts alone won't be enough to jump-start the economy.

Fresh evidence of a still-weakening job market only exacerbated investors' concerns that the economy has far to go before pulling out of recession.

Meanwhile, the fraud investigation of Wall Street money manager Bernard L. Madoff progressed yesterday, as the Securities and Exchange Commission looked into the relationship between Madoff's niece and a former SEC attorney who reviewed Madoff's business.

SEC Chairman Christopher Cox blamed regulators for a decade-long failure to investigate Madoff, who is accused of running a $50 billion Ponzi scheme. Cox said staff attorneys never bothered to seek a formal commission-approved investigation that would have forced Madoff to surrender vital information under subpoena.

Some financial stocks rebounded late yesterday. After being down by as much as 8 percent earlier, Morgan Stanley shares gained 37 cents, or 2.3 percent, to close at $16.50. Goldman Sachs added $2.78, or 3.7 percent, to $78.78.

Energy stocks slumped on falling oil prices. Chevron Corp. dropped $2.19, or 2.8 percent, to $76.82, while Exxon Mobil Corp. lost $2.08, or 2.5 percent, to $81.06.

Oil prices tumbled below $40 for the first time since the summer of 2004 yesterday despite an announcement from OPEC that it planned a record production cut of 2.2 million barrels a day. Many analysts believe oil prices will continue falling next year amid weak demand.

Light, sweet crude for January delivery tumbled 8 percent, or $3.54, to settle at $40.06 a barrel on the New York Mercantile Exchange.

The dollar sank to a fresh two-month low against the euro and a 13-year low against the yen. Gold prices rose.

Bond prices extended sharp gains yesterday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.19 percent late yesterday from 2.28 percent late Tuesday. The yield on the popular three-month T-bill—whose yield has at times gone negative due to frenzied buying—was at 0.01 percent late yesterday, down from 0.03 percent late Tuesday.