A shock three-quarters of a percentage point reduction.  Analyst Jeremy Stretch of Rabobank, described the Fed's move as "a sign of panic".

The US Federal Reserve has cut interest rates to 3.5%. A day after global markets sank due to worries of a possible U.S. recession, the Federal Reserve Bank decided to reduce the risk of further economic problems by a three-quarter point cut interest rate before U.S. markets opened.

Investors collected profits after nearly three sessions of big gains, unwilling to leave money on the table amid ongoing economic uncertainty.

The chart below shows how the market reacted to the FED's rate cut.

It is interesting to note that immediately after the FED's decision, the Dow Jones Industrial index was pushed up by speculative movements. In one hour it had gained 220 points, passing from 12,461 points to 12,681.

Then it firmly pulled back, with traders awaiting key reports on the job market and manufacturing set to arrive on Friday. The Dow, which had been up more than 200 points after the Fed's decision, closed down 0.30%, at 12,442.83.

Investors' concerns about the state of the economy have not let up yet.