The stock market's worst-case "Bearmageddon" scenario appears to have occurred, said Mike O'Rourke, chief market strategist at financial brokerage JonesTrading.

He has described Bearmageddon as when the economy rolls over at a time of "maximum level" of easy monetary policy, while asset values like stocks are still expensive. "That combination of events becomes toxic because investors begin to express concern that the [Federal Reserve's] monetary policy has become impotent," O'Rourke wrote in a note to clients.

On Sunday, the Fed cut its target range for the federal-funds rate to zero to 0.25% from 1.00% to 1.25%, and has now cut the rate by 1.5 percentage points since March 3. The move comes in response to the coronavirus outbreak, which has disrupted economic activity.

The Fed also said it implemented a bond-buying program, known as quantitative easing, of at least $700 billion, and said its open-market desk has recently expanded its overnight and term repurchase agreement operations, known as repos.

Despite what O'Rourke referred to the Fed's latest "Bazooka," S&P 500 futures fell their limit of 5% Sunday evening. In morning trading Monday, the Dow Jones Industrial Average plummeted 2,264 points, or 9.8%, the S&P 500 index lost 9.6% and the Nasdaq Composite shed 9.2%. See Market Snapshot.

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"We thought the panic peaked on Thursday, when most of the country started to shut down, but that was eclipsed tonight by the Federal Reserve," O'Rourke wrote. "All of us have just witnessed a central bank expend all of its conventional and unconventional tools to support an equity market that is less than a month from all time highs."

O'Rourke said the Fed's surprise rate cut on Sunday comes after the S&P 500 index soared 9.3%, while the 50-basis-point cut on March 3 came after the index surged 4.5%. The S&P 500 also fell sharply after that previous cut. See Market Snapshot.

The S&P 500 had closed at a record high of 3,386.15 on Feb. 19.

Also read: Exclusive: Fed is 'throwing money in the wrong place,' says Shiela Bair, former top banking regulator.

"The central bank continues to intervene without ever giving markets an opportunity to clear," O'Rourke wrote. "This will only extend the length of time it takes for the market to stabilize."

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