With analysts almost equally divided on whether the Federal Reserve will cut interest rates by 0.5 or 0.75 of a percentage point when it meets today, stock markets traded nervously yesterday, but managed to regain some ground by the close.

At this stage, a 0.5 percentage point cut is factored into the market and it will probably take a bigger cut if stock prices are to stage any sort of sustained recovery. That, or a clear indication from Fed president Mr Alan Greenspan that further near-term interest rate cuts are likely, will be essential if confidence is to return to stock markets battered by heavy losses.

But technology shares continued to come under the hammer - although the Nasdaq moved into positive territory after European markets had wound up for the day. London's Techmark index of technology stocks fell 2.5 per cent while the Neuer Markt's Nemax all-share index was down just under 1 per cent at the close.

Behind those index figures were some heavy falls by Irish technology companies. On the London market Baltimore fell another 17 1/4p to close on 162 3/4 p sterling while Parthus was 12p lower on 89 1/2p - just a few pence above its flotation price of last May and almost 80 per cent off its 408p high of last year.

While Baltimore and Parthus fell in heavy volumes, Datalex's 23.45 per cent fall on Nasdaq was on the back of tiny volumes - fewer than 5,000 shares - and indicates how illiquid stocks like Datalex can suffer huge losses on minuscule share volumes.

In New York, stocks drifted in a narrow range on the eve of the key Federal Reserve meeting that dealers hoped would pull financial markets out of their tailspin. Both the Dow Jones and the Nasdaq Composite Index seesawed either side of parity as traders remained tentative in light of the recent heavy sell-offs and overall a mood of caution dominated the market.

Investors were uncertain whether the market had formed a near-term bottom after six days of extremely heavy selling that saw the Dow lose 1,000 points and the Nasdaq composite fall below the key 2,000 level. At yesterday's close, the Dow was up 133.53, on 9,956.94, while the Nasdaq was up 60.53 on 1,951.44. But one analyst said that even though the market was oversold, it was not clear whether the bottom had been reached. "A major bottom is generally made on a bang, not a whimper, the bang is lots of fear, lots of volume, and lots of disorientation."

Dealers said investors seemed to be concerned about the continuing stream of profit warnings, with new negative announcements from companies as diverse as Corning and publisher Knight-Ridder.

Many investors are hopeful the Fed will announce a rate cut of up to one full point and could become quite disappointed if no such reduction is ordered. In the current uncertain market scenario, many investors prefer to hold cash rather than equity instruments while they assess the near-term direction of the markets.

In Europe the heavy selling that last week pushed European shares to 17-month lows, was largely absent as investors waited for the outcome of the Fed meeting. "We're getting into a period of semi-panic which I think is overdone - you can look through the turmoil and see some better valuations," said Mr Adrian Fowler at Aberdeen Asset Management. "But I think in the current mood markets may not react much to a rate cut of 50 basis points," he said.