So much for the Federal Reserve being the friend of the stock market.

The Dow Jones Industrial Average plunged 1,000 points on Thursday as traders reassessed what Fed Chair Jerome Powell said at his post-decision press conference yesterday.

A perception of a less hawkish Powell was embraced by the markets on Wednesday afternoon.

The Dow Jones Industrial Average soared 932.27 points and the S&P 500 gained 2.99%, which were the largest gains for the two indices since 2000. Even the beaten-up Nasdaq Composite popped 3.19%.

It now appears that after a few hours of deep thought, traders have formed a more lasting near-term view that the Fed is far from dovish, has let inflation get out of control, and is still poised to dramatically slow down the economy through a series of 50 basis point rate increases.

"Inflation is still going to be a major problem throughout the rest of this year and beyond," Miller Tabak Chief Markets Strategist Matt Maley said.

Selling pressure today was widespread and in some cases severe.

The Nasdaq Composite plunged nearly 5% by early afternoon trading. Small-cap stocks — as measured by the Russell 2000 — dropped more than 4%.

E-commerce companies such as eBay, Etsy, Shopify, and Fastly were hammered amid the one-two punch of broader market pressure and lackluster earnings.

Wall Street pros think the selling could continue in the short term on fears of a sharp, Fed-driven growth slowdown as it catches up on rate increases.

"It is much too soon in economic space for the Fed to allow financial conditions to ease very substantially on a sustained basis again, as this would work against the needed cooling of economic activity required to bring inflation under control," warned EvercoreISI strategist Krishna Guhu. "So if the broad easing on the day across the dollar, equities, rates, and credit continues to rip in the days or even weeks ahead, the Fed will likely have to find a way to rein it in."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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