Department store shares held their gains Tuesday after the Federal Reserve reduced its target for a key interest rate to the lowest level on record in a bold move to fight the financial crisis.

The central bank cut the federal funds rate, the interest that banks charge each other, to a range of zero to 0.25 percent. That is down from the 1 percent target rate in effect since the last meeting in October.

A federal funds rate cut typically pushes the prime rate - or the rate for many consumer and small business loans - down by a corresponding amount. Lower rates on consumer loans could help bolster spending, providing a relief to retailers grappling with the most severe retrenchment in spending in decades. The big worry is that retail sales will only deteriorate next year amid continuing layoffs.

Earlier Tuesday, the economy's weakness was underscored by a report that showed a record plunge in consumer prices in November, putting pressure on the Fed to make a bold move to guard against deflation, which could drag down incomes, hurt home prices even more and depress corporate profits.

J.C. Penney Co.'s shares rose 46 cents, or more than 2 percent, to $20.03, while Kohl's Corp.'s stock gained $1.90, or more than 5 percent, to $36.70. Macy's Inc.'s shares rose 20 cents, or almost 3 percent, to $8.35. Shares of Saks Inc., which operates Saks Fifth Avenue, advanced 7 cents, or almost 2 percent, to $4.04.

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