The Federal Reserve came out with both barrels blazing Tuesday, unveiling a program to mop up short-term commercial paper and hinting at an interest rate cut as the credit crisis continued its stranglehold on the economy.

Nevertheless, technology stocks led U.S. equities lower on fears of a coming recession. Less than an hour before the market close, the Dow Jones Industrial Average was down 318 points, or 3.2 percent, to 9,638.

The tech-heavy Nasdaq declined 76 points, or 4 percent, to 1,788. The Morgan Stanley High-Technology Index tumbled 5 percent to 391 as online retailer Amazon.com skidded 9.5 percent to $59.04, Google dipped 5.3 percent to $351.48, and IBM dropped 5.2 percent to $95.42.

Intel rival Advanced Micro Devices advanced 11.4 percent to $4.71 after the chipmaker said it was spinning off its manufacturing operations in a new company backed by up to $6 billion from an Abu Dhabi investment firm.

In Europe, where banks and other financial institutions remain under pressure, stocks closed mixed. The FTSE 100 climbed 0.4 percent to 4,605, the German DAX lost 1.1 percent to 5,327, and the French CAC 40 edged up 0.6 percent to 3,732.

Tuesday morning, the Federal Reserve moved to calm jittery global stock markets by unveiling a dramatic new weapon that would allow it to buy short-term commercial paper, providing a “liquidity backstop” for corporate issuers.

The Fed said it was creating the Commercial Paper Funding Facility to enhance liquidity by buying three-month unsecured and asset-backed commercial paper directly from issuers. The move is designed to unclog the market and enhance investors’ confidence.

Commercial paper is commonly bought by money market mutual funds and pension funds. Money market funds, some of which dabbled in debt from financial companies like bankrupt Lehman Brothers, have themselves been under pressure. Reserve Management Corp., founded by the originator of the money market fund, recently told investors that one of its funds would be unable to return investors’ capital in full.

In the afternoon, Federal Reserve Chairman Ben Bernanke signaled that the economy’s worsening condition could trigger an interest rate cut.

“Overall, the combination of the incoming data and recent financial developments suggests that the outlook for economic growth has worsened and that the downside risks to growth have increased,” he said. “At the same time, the outlook for inflation has improved somewhat, though it remains uncertain. In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate.”

The Fed did not specify how much capital it would use to acquire commercial paper.