The stock market recovered by 10:45 a.m. eastern time from drastic early morning losses after the Federal Open Market Committee surprised the market this morning by lowering the federal funds rate three-quarters of a percentage point to 3.5 percent.

The Fed's decision was made during an emergency telephone conference with Fed officials Monday night. The meeting took place after global financial markets nosedived Monday as recession fears grew among investors.

According to a prepared press release, the FOMC was responding to a global selloff in the financial markets, a weakening economy, and evidence that the housing downturn is deeper than originally anticipated.

News of the rate cut broke at 8:20 a.m. Eastern time before U.S. markets opened. At least initially, the rate cut didn't calm nervous investors as the Dow fell by more than 400 points by 9:30 a.m. The market then rebounded by about 200 points by 10:45 a.m.

As the financial markets seesawed, leaders in the housing industry saw the rate cut as a positive sign.

"The cut in the federal funds rates will bring interest rates down, which means people sitting on the fence will start looking at the housing market again," said Lawrence Yun, chief economist of the National Association of Realtors.

"We anticipated a 50 basis point cut at end of January, but coming out a little stronger is a good move," Yun concluded.

The NAHB echoed Treasury Secretary Henry Paulson's comments this morning before the U.S. Chamber of Commerce on the need for Congress to move swiftly to address the current housing situation by enacting important housing legislation.

The bills NAHB supports are FHA modernization to increase the availability of affordable FHA mortgages; comprehensive reform of Fannie Mae and Freddie Mac that will let them temporarily buy larger home loans in high-cost markets; and allowing cities and states to issue tax-exempt mortgage bonds to refinance existing loans to help troubled borrowers.

"The Federal Reserve has set the tone by taking a decisive step to cut interest rates, now it's time for Congress to move quickly and pass these three bills," said NAHB President Brian Catalde. "The Fed rate cut, action on these three bills, and enacting an economic stimulus package is absolutely vital to restore consumer and business confidence on Main Street and Wall Street."

The Fed indicated that it will continue to monitor the economy and step in when needed.

"Appreciable downside risks to growth remain," said the FOMC. "The committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks."