Stocks tumbled Thursday as investors fretted over a growing list of concerns, including slowing economic growth, trade policy and the threat of a U.S. government shutdown.
The Dow lost 464 points, or 2 percent, to close at 22,860, the first time the blue-chip index has closed below 23,000 points since October of 2017. The Dow has lost nearly 1,700 points, or 7 percent, over the last six trading sessions.
The selling in the last two days came after the Federal Reserve raised interest rates for the fourth time this year and signaled it was likely to continue raising rates next year, although at a slower rate than it previously forecast.
Markets are also concerned about the ongoing trade dispute between the U.S. and China, which has lasted most of this year and shows few signs of easing, and forecasts for a dip in economic activity next year.
The broader S&P 500 closed at a 15-month low, while Nasdaq also lost ground – the tech-heavy index is now down 20 percent from its peak in August.
What worries investors
Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, said Fed Chairman Jerome Powell didn't appear concerned about the state of the U.S. economy despite deepening worries among investors that growth could slow even more.
"He may be a little overconfident," said Wren. "The Fed needs to be paying attention to what's going on."
The Fed trimmed its forecast for 2019 economic growth to 2.3 percent after an expected 3 percent GDP gain this year.
Powell acknowledged that the Fed's decisions are getting trickier because they need to be based on the most up-to-date figures on jobs, inflation and economic growth. For the last three years the Fed has been able to tell investors weeks in advance that it was almost certain to increase rates. But things are less certain now, and the market hates uncertainty.
Mnunchin: Market reaction "completely overblown"
The Fed's move to gradually lift interest rates from their ultralow levels during the recovery has drawn fierce criticism from President Donald Trump, who says monetary policy risks snuffing out economic growth.
Treasury Secretary Steven Mnuchin said Thursday that financial markets are overreacting to the Fed's rate hike this week.
"I think the market reaction is completely overblown," Mnuchin said in an interview with Fox Business, noting that the economy is still projected to out-perform other countries next year.
Mnuchin said computerized program trading is driving stock prices down further, adding that he believed markets were disappointed in Powell's comments at a news conference following Fed's latest policy statement.
Despite the Fed's forecast for slower growth, Mnuchin said the administration still thinks it can achieve 3 percent annual growth next year as well.
On the issue of whether the current trade negotiations between the U.S. and China will be able to reach a deal to avoid more penalty tariffs, Mnuchin expressed cautious optimism.
"We've been having ongoing trade discussions by phone over the last few weeks," he said. "We are moving forward with those discussions and trying to reach an agreement ... which covers the whole range of issues."
If the sides manage to thrash out an agreement, it won't come easily.
"Our long-standing view has been that serious negotiations would start after the U.S. midterms, but it would still take months and additional twists and turns before a deal is struck. That remains our call," analysts with Bank of America Merrill Lynch wrote in a note. "The negotiations are proceeding as expected with a mixture of good and bad news."
Where the "smart" money is moving
Investors are responding to a weakening outlook for the U.S. economy by selling stocks and buying ultra-safe U.S. government bonds. The bond-buying has the effect of sending long-term bond yields lower, which reduces interest rates on mortgages and other kinds of long-term loans. That's generally good for the economy.
At the same time, the reduced bond yields can send a negative signal on the economy. The bond market has correctly predicted several previous U.S. recessions by buying long-term bonds and sending yields down.