"...the market[s] interpreted Tuesday’s action as signalling the start of a rate-cutting cycle, pricing in a virtual certainty of a further cut at the next Fed policy meeting in October and another on or before its January policy meeting."
This is apparent in the figure below from the Cleveland Fed. Using options on fed fund rate futures, this figure shows the estimated probability of different outcomes in the October FOMC meeting. This new belief in a rate-cutting cycle is evident in the changed probability for for the FOMC moving the fed fund rate to 4.50% in October. Today the probability hit 60.2%, yesterday it was only 30.4%. That is a dramatic change in market expectations. Apparently, the markets believe they have seen a new side to the Bernanke Fed.