MW Don't expect Trump or Powell to bail out investors this time as stock market nears 'danger zone'

By Joseph Adinolfi

The S&P 500 was on track to crash below its 200-day moving average for the first time since November 2023 on Monday

After three weeks of unrelenting declines, U.S. stocks were poised to slide into the market's "danger zone" on Monday.

In the past, the S&P 500 SPX breaking below its 200-day moving average was enough to entice either the Federal Reserve or the White House to step in and deliver a boost to investors' confidence.

That was the case in November 2023 when, after a punishing stock-market correction that saw Treasury yields BX:TMUBMUSD10Y top 5%, the Fed hinted that interest-rate cuts could arrive more quickly than investors had previously expected. That helped stocks rip higher through the end of the year.

But this time around, investors aren't holding their breath. With stocks poised to crash below the key technical threshold, few on Wall Street expect that either Trump or Fed Chair Jerome Powell will come running to the rescue, said George Cipolloni, a portfolio manager at Penn Mutual Asset Management.

"I think [Treasury Secretary Scott] Bessent was pretty clear last week about that," Cipolloni said during an interview with MarketWatch. "I'm not sure what kind of decline will get them to move."

Lack of progress in further slowing inflation has effectively tied the Fed's hands. Meanwhile, the notion that Trump would swiftly reverse course on tariffs or mass deportations to help shore up stocks had factored into many investors' bullish outlook on the market heading into 2025.

See: There's a Fed put and a Trump put - but there might now be a C-suite put, as well

But the administration's actions and rhetoric over the past month have helped to disabuse them of that notion.

As Cipolloni alluded to above, Treasury Secretary Scott Bessent last week denied that there was a "Trump put" in place for stocks, while also saying that there would be a "detox period" for the U.S. economy as the Trump administration enacted its spending cuts and tariff agenda.

Then, over the weekend, Trump declined to rule out a recession during an interview with Maria Bartiromo on Fox Business. Instead, he said there would be a "period of transition" for the economy. His comments have been widely blamed for driving the latest bout of bloodletting on Wall Street.

After three straight weeks in the red, the S&P 500 was poised to finish below its 200-day moving average on Monday. Any finish below 5,734.77 would see the index officially break below the closely watched technical floor for the first time since November 2023. Investors watch the 200-day moving average as a gauge of the market's long-term trend. When the index breaks below it, it could signal a shift away from a bull market and toward a more bearish scenario.

There's an old saying on Wall Street: Nothing good happens below the 200-day.

"Selloffs accelerate and swings get dramatically bigger in the danger zone - or the space below the 200-day moving average," said Callie Cox, chief market strategist at Ritholtz Wealth Management, in commentary shared with MarketWatch via email.

Cox found that since 2000, the S&P 500 has breached its 200-day moving average during a selloff 18 times. Eleven of those times saw stocks quickly recover, or at least further losses were limited. After the other seven ocassions, the market continued lower.

Many on Wall Street fear more pain could be in store as the selling pressure on stocks has intensified.

"A big break below 5,700, without Trump policy moderation, signals more downside risk," said Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, in a report shared with MarketWatch over the weekend.

On Friday, investors enjoyed a brief reprieve after Powell said he didn't see any signs that the U.S. economy was headed for a recession.

But while traders have boosted their expectations for the number of interest-rate cuts in 2025, the Fed has remained officially on hold. Last time around, the Fed helped halt a stock-market correction in late 2023 when senior officials signaled that they were likely done hiking interest rates, and that cuts could soon arrive in early 2024. Those plans were briefly derailed by a modest uptick in inflation, but the Fed ultimately delivered in September.

Even Trump has shown signs of backing away from tariffs in the past when markets were sinking as a result. During a stock-market rout in 2018 that was partly spurred by Trump's trade war with China, the White House ultimately reversed course and struck a deal with Beijing that halted the back-and-forth as stock-market losses snowballed.

Some believe the administration still has a pain threshold for stocks, despite Bessent's talk about prioritizing Main Street over Wall Street. After all, Trump has already twice imposed tariffs on Mexico and Canada, only to swiftly delay all, or at least most, of the new levies.

At the same time, White House has followed up with more tariffs on China, while expanding levies targeting imported steel and aluminum. Trump and other senior officials in the administration have also warned that reciprocal tariffs on U.S. trading partners would likely arrive in early April.

Mark Gibbens, investment strategist at BOK Financial, said he still believes there is a "Trump put" for stocks.

"I just believe it's lower than we thought at the beginning of the year," he said.

U.S. stocks were headed for their worst day of 2025 on Monday, with the S&P 500 down 157 points, or 2.7%, in recent trade, at 5,612. The Nasdaq Composite COMP was off by 762 points, or 4.2%, at 17,430. The Dow Jones Industrial Average DJIA was off by 797 points, or 1.9%, at 42,000.

-Joseph Adinolfi

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March 10, 2025 14:34 ET (18:34 GMT)

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