After a tentative rebound, global stock markets turned lower as a coordinated rate cut by major central banks failed to unlock frozen credit markets, putting pressure on officials to take further action.
US shares continued to fall after a six-day losing streak in which they have shed almost 15 percent. Even IBM, whose preliminary earnings topped forecasts, saw its stock fall.
The US market faces additional uncertainty after a ban on short-selling of financial stocks expired at midnight on Wednesday.
European stocks also were higher but then fell back a day after hitting near five-year lows. Asian stocks were mixed as Japan's Nikkei dipped to its lowest close in more than five years after a volatile day.
Three-month borrowing on interbank markets remained expensive near this week's highs across all currencies, and lending beyond a week or two remained frozen, traders said.
- Why Going Into Cash Isn't a Good Idea
- Where You Can Put Your Cash to Work
- Short and Long-Term Stock Picks: Doll
- What Investors Should Buy Now: Top Strategist
- Short Sellers Are Back...So?
- A Bear Market Until 2011: Analyst
- Financial Psychologist: Fear, Greed and Bull Traps
Acting piecemeal, they have rescued banks, injected massive amounts of liquidity into the markets, agreed to take toxic debt off the books of financial institutions and now, in unison, have slashed interest rates in the face of the greatest financial crisis since the Great Depression.
That has raised the question of what options remain to combat the market meltdown, which has destroyed lenders from Wall Street to Iceland to Germany and left people worried about the security of their savings and jobs.
"The rate cuts are a good step in the right direction to stop the bleeding, but this won't be enough," said Rik Zwaneveld, trader at AFS Brokers, in Amsterdam. "European governments have to act swiftly and decisively together."
Treasury Secretary Henry Paulson, speaking to reporters on Wednesday, stressed that the recently approved $700 billion financial bailout bill gave him wide authority to inject capital into the banking system, and he said he would not rule out having Treasury take an ownership position in banks if necessary.
"We will use all the tools we've been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size," he told a press conference.
The bank recapitalization plan was an option included in the $700 billion rescue plan approved last week in which the U.S. Treasury will buy bad loans from financial institutions in the hope that it will jump-start lending.
Equity stakes, still in its preliminary stages, has emerged as one of the preferred options being discussed in Washington and on Wall Street, The New York Times reported, citing unnamed U.S. officials.
The United States would be taking a leaf out of Britain's book. London announced a $87-billion plan to partially nationalize its banking sector and guarantee interbank lending.
—Reuters and AP contributed to this report.