(Updates with markets closed)
BUENOS AIRES, Jan 22 (Reuters) - Argentine stocks rallied on Tuesday for the biggest single-day rise in five months after the U.S. Federal Reserve slashed interest rates in an attempt to head off a recession.
The MerVal index .MERV of 42 leading companies closed 3.55 percent higher at 1,943.56 points, rebounding from a 6.27 percent fall a day earlier as global markets roiled over concerns about the U.S. economy.
Gains on the MerVal were led by oil-linked shares.
The Fed on Tuesday unexpectedly cut its benchmark interest rate by three quarters of a percentage point to 3.5 percent, its biggest move in the federal funds rate in more than 23 years.
"A measure of such magnitude helped to reverse the sensation of panic in the markets," said brokerage Delphos Investment in a report.
On the broad market, volume was a modest $43 million, while 54 issues advanced, 20 retreated and five remained unchanged.
"The positive point was the recuperation of a volume in line with the circumstances," said Juan Diedrich, a broker at Capital Markets Argentina. "But prudence is still the norm in such a volatile climate.,"
Argentine bonds fell, ending 0.9 percent lower on average as investors sought liquidity amid the recent global market turbulence. The most important losses were seen in Par bonds denominated in dollars, which fell 2.4 percent ARPARD=RASL.
The peso strengthened slightly following the Fed's decision. In informal trade between foreign exchange houses, as measured by Reuters, the currency ended unchanged at 3.1825/3.185 per dollar ARSB=.
In formal interbank trade, the peso firmed 0.08 percent to close at 3.155/3.1575 ARS=RASL. (Reporting by Jorge Otaola; Writing by Gaspard Sebag; Editing by Leslie Adler)