At one point the index was down as much as 4.3 percent. However, the index then began to rally to be down 2.36% to 8,886 points at 9.25am local time.
This is the first time the SMI has been below 9,000 points since September 2017, with the biggest losers early on Tuesday being banks. Credit Suisse shares were 5.2 percent lower while UBS stocks had tumbled 4.5 percent.
The falls on the Swiss index, which includes the 20 largest companies in the country, come a day after the Down Jones Industrial Average suffered its worst points fall in history, shedding 4.6 percent on Monday on the back of investor fears of rising interest rates.
The sharp downturn in the United States wiped out all market gains seen in 2018 to date while Asian markets also took a hit last night.
Monday's chaos on Wall Street spelled an abrupt end to the buzzing mood on economic markets since Donald Trump's arrival in Washington – a phenomenon described by the White House as the “Trump Bump”.