Investors and analysts on Wall Street are so confident that the US Federal Reserve will today again cut interest rates - already at a 40-year low - that the stock market is likely to go spinning downwards if it does not.

As it was, the Dow fell yesterday below the psychologically-important 10,000 level after rising above it last week for the first time since August, and the Nasdaq fell below 2,000 again amid profit-taking and concerns that the market may have advanced too far, too fast.

The unanimous opinion of the top 24 bond firms polled by Reuters on Friday is that the Fed's policy-making committee will announce a quarter point cut after its scheduled meeting in Washington today, bringing the interest charged on short-term loans down to a record 1.75 per cent.

Despite cutting rates 10 times this year, the policy of the Fed and its chairman Mr Alan Greenspan has not prevented the economy falling into recession and today's action is expected to have limited effect.

Mr James Glassman of J.P. Morgan said he expected the Fed to ease rates by a quarter point and that a half point cut was more likely than none at all, with the risks remaining tilted towards weakness.

Mr Rod Smith, of First Union Securities, said the action by the Fed was already the most aggressive in history and that they would contribute to an economic recovery in 2002.

Long-term interest rates have edged higher in recent weeks, slowing down the boom in house refinancing, which has given the economy an infusion of disposable income.

Since the Fed's last rate cut on November 6th, a series of mixed economic signals have generally been taken as providing evidence that the recession would end next year. According to the National Bureau of Economic Research, which defines US business cycles, the economy entered recession in March.

Hopes for an economic recovery in 2002 have already lifted the market off the three-year lows reached after the September 11th attacks, but some economists have been warning that they may be now slightly overvalued.

The Dow has rallied by more that 20 per cent since its lows after September 11th. One of the stocks to fall most heavily yesterday was Compaq, the computer maker, which slipped more than 12 percent on increasing doubts about its planned merger with Hewlett-Packard.

The market was sluggish as it awaited the Fed's next move, and was also weighted down by a forecast from fibreoptic parts maker JDS Uniphase of lower quarterly sales as the industry-wide downturn showed no signs of easing.