A day after Powell's assurances about the economy, markets are worried that 'the Fed breaks something'

cnbc.com:

Federal Reserve Chairman Jerome Powell's insistence that the central bank is not deliberately trying to cause a recession and that the economy is on solid footing is exactly what someone in his position would be expected to say.

The trouble is, the Fed's likely to get a recession anyway as data shows the economy is a far cry from stable.

Consequently, markets whipsawed Thursday, going from a positive reaction on Wednesday to Powell's post-meeting comments to a rout as worries fester over what effect higher interest rates and tighter monetary policy will have on a fragile state of affairs.

«What the market is worried about, even before you get to a recession, is a policy mistake, that the Fed breaks something,» said Quincy Krosby, chief equity strategist at LPL Financial. «The market also is questioning his comment that the economy is strong.»

More specifically, two comments the Fed chair made stand out from the news conference: First, that the Fed is not trying to «induce a recession now. Let's be clear about that.» Also: «There's no sign of a broader slowdown that I can see in the economy.»

In fact, there are myriad signs of a slowdown.

On Thursday alone, real estate data for May showed a 14.4% monthly slowdown in housing starts at a time when there is a chronic shortage of homes. A Fed manufacturing reading showed continued contraction in the Philadelphia region. Weekly jobless claims were higher than expected as well.

That data piles onto other recent points: Inflation at 41-year highs, consumer confidence at historic lows, and retail spending falling amid dramatically higher prices.

«At minimum, growth was going to slow even before the Fed started pressing on the brakes,» said Tom Porcelli, chief U.S. economist at