Wall Streets ends down, oil gains as Powell suggests aggressive Fed policy

"Powell is intimating that avoiding a recession will not be easy. That is new," said Tim Ghriskey, senior portfolio strategist for Ingalls & Snyder in New York. "It's a relief for the market to hear the Fed admit this, therefore they may be more focused on avoiding this possibility or avoiding any type of deep recession, which is what the market really fears."

The Dow Jones Industrial Average ended down 1.05 percent, while the S&P 500 lost 1.48 percent and the Nasdaq Composite dropped 2.07 percent. The MSCI world equity index, which tracks shares in 45 nations, was down 1.12 percent.

Oil prices gained ground as concerns about supply due to a potential European Union ban on Russian oil came to the fore. Russian forces stepped up their attacks in eastern Ukraine on Thursday. Brent crude settled up 1.4 percent at $108.33 a barrel, and US crude ended 1.6 percent higher at $103.79 a barrel.

The benchmark 10-year Treasury yield was 2.89 percent after Wednesday's high of 2.98 percent, which had been the highest since December 2018. Two-year yields, which are highly sensitive to interest rates, reached 2.73 percent on Thursday, also the highest since December 2018, before dipping back to 2.68 percent.

Markets had been boosted earlier in the day, as upbeat Tesla earnings and airline forecasts of profitability this quarter joined with data showing unemployment rolls at their lowest level in 52 years. Powell said during a discussion of the global economy at the meetings of the International Monetary Fund that the labour market was "not sustainably hot."

His remarks effectively confirm market expectations of at least another half-percentage-point rate hike from the Fed next month while one ECB policy maker said on Wednesday it might start hiking eurozone rates as early as July.

In the currency markets, the dollar index, which tracks the safe-haven currency against a basket of six currencies, was up 0.2 percent to 100.58.

Looming rate hikes weighed on gold, which hit its lowest levels in two weeks in afternoon trading. Spot gold was last down 0.33 percent to $1,951.03 per ounce.