Not even an early morning interest rate cut from the Federal Reserve could shore up losses in the U.S. markets Monday, as jittery investors went on a selling spree, fearing that last week's terrorist attacks could lead to a worldwide recession.

The S&P 500 closed down 4.92 percent, while the Nasdaq ended 6.82 percent lower and the Dow Jones Industrial Average finished the day down 7.12 percent, or 684.81 points in a record one-day point loss.

The Dow's previous one-day record loss was on March 14, 2000, when the index plummeted 617.78 points.

After a precipitous drop in early trading Monday, the markets continued to post losses as nervous investors decided to unload some of their more vulnerable securities, such as airline stocks, while gobbling up defense industry shares.

Major tech stocks also took a beating.

Microsoft Corp. (MSFT) fell 8.11 percent, while Yahoo Inc. (YHOO) traded down nearly 7.32 percent. Dell Computer Corp. (DELL) slipped 8.28 percent, Intel Corp. (INTC) was down 9.24 percent, and Compaq Computer Corp. (CPQ) slid 15.45 percent, while Amazon.com Inc. (AMZN) dropped 13.20 percent.

The trading was expected in light of what was happening with the economy before last Tuesday, said Gartner Inc. analyst David Furlonger, who added that there was a backlog of sell orders that hadn't been dealt with after the disaster.

And besides the high volume of trading, the systems themselves have held up very well, Furlonger said.

With telecommunication systems in New York, and particularly lower Manhattan, damaged in the attacks, there was some concern over the functioning of the exchanges. The NYSE, Nasdaq and American Stock Exchange (AMEX) all conducted tests on Sunday, however, to ensure that trading would function normally.

Due to damage to its facilities, the AMEX exchange is currently operating out of space at the NYSE and the Philadelphia Stock Exchange.

With the markets closed since the attacks last Tuesday morning, stock brokers in New York returned to the New York Stock Exchange (NYSE) trading floor in downtown Manhattan amid acrid haze and smoke still emanating from the rubble that once was the twin towers of the World Trade Center. Gaining entrance to the exchange meant passing through five ID checkpoints, a metal detector, and a police-dog sniff test.

Two hijacked planes smashed last Tuesday morning into the World Trade Center, which sat at the heart of the city's financial services center and near the stock exchanges. The attack caused both towers to eventually collapse and damaged other buildings in the vicinity, while another hijacked plane smacked into one side of the Pentagon outside of Washington, D.C. and still another crashed in Pennsylvania. More than 5,000 people are reported missing from the attacks, many of whom are feared dead.

The NYSE opened at 9:33 Monday morning, following three minutes of silence and a rendition of "God Bless America," in honor of those who were lost.

"Today America goes back to business and we do it as a signal to those criminals who inflicted this heinous crime on America and all Americans that they have lost," said Richard Grasso, chairman of the NYSE. "Our nation has come back together as we have in times past, whether it be war or economic challenge. We are one country today -- committed, unified, in the pursuit to find and punish and obliterate those who committed that horrible act against this great nation."

The reopening of the markets is being seen by many as a first step to returning to normal life in the U.S., and their performance is being scrutinized as nervous investors wait to see what impact recent events will have on the economy.

Earlier Monday, Tokyo's Nikkei 225 index took a hit in anticipation of the U.S. markets reopening, slipping 5 percent, while European markets held steady, awaiting guidance from the U.S.

In an effort to reassure nervous investors, the Federal Reserve cut interest rates by another half percentage point an hour before the markets reopened Monday. In addition, the U.S. Securities and Exchange Commission (SEC) eased restrictions on companies repurchasing their own stock Friday, hoping to inject some extra liquidity into the markets. The SEC is now allowing companies to trade their stock for the first and last 30 minutes of each market day for up to 10 days.

A number of companies took advantage of the repurchasing opportunities to bolster their stock, including Akamai Technologies Inc., ETrade Group Inc., 3Com Corp., Echelon Corp. and Compaq.

It remains to be seen whether the markets will recover, as investors digest officials' latest attempts to shore up confidence.

The terrorism attacks have already taken a toll on the slowed U.S. economy. Citing financial damage incurred by the grounding of all air travel last week, Continental Airlines Inc. announced Saturday that it was permanently reducing its flight schedule by 20 percent, and laying off 12,000 employees.

Struggling Midway Airlines Corp. announced that it was closing its doors for good just one day after the attacks.

Responding to the pounding the airlines are taking, airline stocks plunged Monday morning, with Standard & Poor's Airline Index dropping nearly 29 percent.

Other than the airline sector, the industry that has probably suffered the greatest losses, in terms of human capital, infrastructure, and data, is that of the brokerage houses and financial services.

Many big name financial firms had offices in or near the World Trade Center, and some, such as Cantor Fitzgerald LP, have reported hundreds of employees still missing.

This blow to the financial community comes after the U.S. economy has already experienced a marked slowdown. Some analysts have warned that these latest events could push the economy into a full-scale recession.

The specter of a prolonged war against Afghanistan, where the prime suspect in the terrorism attacks, Osama bin Laden, is believed to be hiding, has also left investors jittery.

Defense stocks have received some play in anticipation of a U.S. retaliation by the U.S., however. Defense electronics maker Raytheon Co. (RTN) gained more than 20 percent in early trading, while aircraft and electronics provider Lockheed Martin Corp. (LMT) surged more than 10 percent.

Still, while some sectors are due to benefit from the rebuilding and retaliation, the overall mood of the markets Monday -- with every major index down -- appeared pessimistic.

One trader on the floor of the NYSE tried to put things in perspective, however, by wearing a bright red button that read "Don't Panic" -- a holdover from his working days during the 1987 market crash.

"I think it's a message people need today," he said.