The Fed pulls a surprise rate cut, and Wall Street gets the message. SELL! SELL! SELL!

While political news will dominate this Super Tuesday, I sure wasn’t expecting to see this during the work day.

The Federal Reserve cut interest rates Tuesday in a rare emergency move, responding aggressively to the growing threat the coronavirus poses to the economy and financial markets.

The Fed lowered its key federal fund rates by half a percentage point to a range of 1% to 1.25%, the central bank said in a statement. It marked the Fed's first rate cut between scheduled meetings since the depths of the financial crisis in 2008….

“The fundamentals of the U.S. economy remain strong,” the Fed’s policymaking committee said in a statement. “However, the coronavirus poses evolving risks to economic activity.”

The Fed said it’s monitoring developments “and will use its tools and act as appropriate to support the economy.” That could signal the Fed may be "leaning toward an additional rate cut" at its meeting March 17-18, Paul Ashworth, chief U.S. economist of Capital Economics, wrote in a note to clients.

Usually, a cut in interest rates means that stocks jump, because it’s cheaper to borrow money and it becomes less worthwhile to stay with safe investments like bonds. And for about 5 minutes after the Fed's announcement, that happened, with the DOW Jones Industrial Average getting above 27,000.

But then that quickly reversed into a torrent of selling, with the DOW ending up down nearly 800 points for the day, and it not only fell below 27,000, it fell below 26,000.

So why did we see another dive today? Because some people like CNBC’s Jim Cramer didn’t see dollar signs from cheap money in the Fed’s move. Instead, he said it raised more questions as to why they had to do a surprise rate cut in the first place.

“It’s great that the Federal Reserve recognizes that there’s going to be weakness, but it makes me feel, wow, the weakness must be much more than I thought,” Cramer said, adding that the rate cut doesn’t exactly ease coronavirus fears.

“If you got something that allowed you to get out of the hospital, if we had a vaccine, anything, then you won’t need this rate cut,” Cramer said. “The more important thing is that we need people to be able to stay at work.”

Not that I like being on the same side as Jim Cramer, but I agree with this assessment. If things were under control and the economy was in decent shape, there’d be no need to cut rates 50 basis points below its already-low levels.

Another reason why the Fed action is sparking more concern is because a rate cut likely won’t do much to deal with the economic problems that coronavirus might cause.

[Lawmakers] are facing a novel crisis: how to help an economy whose main challenge is that the epidemic means people are adverse to going out in public to work, shop or entertain themselves and spend money.

If the problem was in the housing sector, lower interest rates would spur mortgages lending and borrowing, but the problem in the coronavirus crisis is in the service sector - travel, tourism, and entertainment.

Lower mortgage rates are not going to convince people to go to the theater, noted David Kelly, chief global strategist at J.P. Morgan Asset Management.

Without customers, a lot of small companies in tourism, travel, entertainment and leisure sectors are going to be strapped for cash flow. Without it, they’ll start laying off workers. The goal for fiscal policy is to avert this “vicious cycle,” said Diane Swonk, chief economist at Grant Thornton.

“I think the Fed is now saying we did the monetary side and it’s time to get the fiscal side involved,” said Leslie Falconio, senior strategist at UBS Global Wealth Management, in an interview.

But what how much fiscal room do we have to do that? We already were on track to have a fiscal deficit of over $1 trillion a year before any economic slowdown was accounted for, and we’ve already had a GOP Tax Scam that cut taxes for a sizable amount of people (but not for everybody - we owe $3,000 with no writeoff for our home AGAIN).

That being said, with the 10-year note falling below 1% (!), there's a lot of room to be able to do immediate, short-term spending to keepm the economy on track. This can include money for medical research and treatment to take care of people that might be stricken with coronavirus, and this also might be the right time to push through an upgrade in infrastructure that Trump promised when he was for office 4 years ago, but has never delivered on.

Of course, some of this fiscal response could be paid for by rolling back some of the tax cuts for the rich, we could do these investments, limit the growth in the deficit that results, and work to avoid recession by allocating funds in a much more effective way than giving it away to the rich and corporate.

I'm also reminded of this picture, which was taken on Wall Street less than a month after the Tax Scam was passed into law.

More than 2 years later, we are back below 26,000. That's despite all of the corporate tax cuts and stock buybacks that have inflated earnings per share. And now we have slower job growth and GDP growth than we were seeing before the Tax Scam became law.

I think that reality had a lot to do with the market falling apart with today's rate cut. The Fed's message wasn't "We will be OK and get by." It was "THINGS ARE REALLY MESSED UP AND WE FEEL WE HAVE TO DO SOMETHING BIG!" And now, there isn't much left that the Fed CAN do.

The real message from the Fed came in loud and clear to the traders.