Concerns about the credit markets still fed demand for the relative safety of government debt, though pressures eased. The yield on the three-month Treasury bill, which moves opposite its price, rebounded to 0.81 percent from 0.50 percent late Monday. Demand for short-term Treasurys remains high because of their safety; investors are willing to take extremely low returns just to have their money in a secure place.

Some investors moved out of longer-term Treasury bonds, which don't draw as much demand as shorter-term debt in times of fear. The yield on the 10-year note rose to 3.51 percent from 3.45 percent late Monday.

Investors are still hoping to see other moves from the Fed to boost confidence. Australia's central bank lowered interest rates by the largest amount since 1992 in a surprise move, and that reignited hopes that others, including the Fed and European Central Bank, might follow suit.

Though not giving the market a rate cut, the Fed has taken other steps to help unclog the credit markets. On Tuesday, policymakers provided more details about when it will make $900 billion in short-term loans available to squeezed banks.

The loans are made available to banks through auctions. The Fed, in coordination with other countries' central banks engaged in similar efforts, laid out dates that it will conduct the auctions through the rest of this year.

But write-downs of bad debt at Bank of America are a reminder to investors that troubles within the financial sector remain, according to Kim Caughey, equity research analyst at Fort Pitt Capital Group.

"I think we have weeks of volatility ahead of us," she said. "We're not overly optimistic but we're not indulging in doom and gloom either."

She said the arrival of quarterly results from corporations has made investors even more jittery, with investors seeking any information about how companies are faring. She said some companies could go under because of the tough economic conditions but that the stronger players would survive.

"You're going to get that Darwinian shakeout process. That's going to happen from the mom and pops all the way up to the big boys," she said.

Minutes from the Fed's last meeting described a U.S. economy that was slowing considerably and credit markets that were deteriorating rapidly. The meeting was held Sept. 16, the day after the failure of Lehman Brothers. The central bank's Open Market Committee found the risks from weaker growth and higher inflation were roughly equal; that was its rationale for leaving rates unchanged. Policymakers, who will meet again at the end of the month, left key interest rate unchanged at 2 percent.

About 2,800 stocks declined on the New York Stock Exchange, while fewer than 400 advanced. Consolidated volume came to 6.84 billion shares, compared with 7.81 billion shares traded Monday.

The Russell 2000 index of smaller companies fell 36.96, or 6.20 percent, to 558.95.

Overseas, Japan's Nikkei stock average fell 3.03 percent. Britain's FTSE 100 rose 0.35 percent, Germany's DAX index fell 1.12 percent, and France's CAC-40 rose 0.55 percent.