"Key risks in 2019 include tightening financial conditions, Fed policy, concerns about trade wars, the political malaise in Washington and unsustainable USA economic and earnings growth", Spika said.
In recent years, the Fed has managed to telegraph its actions weeks in advance to prepare the financial markets for any shift.
The Nasdaq has shed 19.5 per cent from its August peak, just shy of confirming a bear market.
Technology's huge popularity during the recent boom years made it even more vulnerable as investors' moods turn sour. Markets tend to move, however, on what investors anticipate will happen further out.
Earlier this week, the Fed raised interest rates for the fourth time this year and signalled that more increases are likely next year.
The Fed on Wednesday raised the federal funds rate by a quarter of a percentage point, to a range of 2.25 to 2.5 percent, but signaled a slower pace of rate hikes next year as the USA economy is expected to cool down. Wren said investors want to know that the Fed is keeping a close eye on the situation. "The Fed needs to be paying attention to what's going on".
"Faced with political pressure from the president to stop raising rates and panic on the part of investors who were seeing their massive capital gains disappear, the Fed could have punted". And markets hate uncertainty.
Furthermore, some say the Fed's inability to reassure investors that they understand the risks across global markets is fuelling appetite for safe-haven gold in the short- to medium-term.
For Powell, the economic outlook has become hazier as, in his words, "cross-currents" have emerged. To put things into perspective, Central Banks are known to gradually increase interest rates so as to slow down the economy as and when inflationary signs start to appear. That's generally good for the economy.
A rise in copper and Chinese steel prices boosted the metals and mining index 1.4 per cent higher, in its third straight week of gains. Sharp drops in long-term bond yields are often seen as precursors to recessions.
The key point, however, is that stocks must fall a long way before the Fed reacts.
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The S&P 500 dived 1.58 per cent and the Nasdaq 1.63 per cent.
Financial stocks, which account for over a third of the benchmark index weight, led losses with the financial index down 1.2 per cent for its third straight week in the red.
"Much of that (Fed) flexibility was lost in translation for financial markets because the fed remains optimistic about growth", Swonk said.
"Clearly the Fed is changing its tone and it's getting a little more dovish following the market reaction this week", said Adam Sarhan of 50 Park Investments.
The Russell 2000 is down nearly 24 percent from the peak it reached in late August and it's down 13.6 percent for the year to date.
The possibility of a partial shutdown of the federal government also loomed over the market on Thursday, as funding for the government runs out at midnight Friday. By making it clear that it believes the pessimism surrounding America's economy is overdone, the Fed is sending a positive signal to markets.
Oil prices continued to retreat.
Fed officials expected the USA economy to grow at 3 percent this year, a little bit lower than 3.1 percent estimated in September, according to the Fed's latest economic projections released on Wednesday. Brent crude, used to price worldwide oils, rose 1.7 percent to $57.24 a barrel in London. Eastern time. The S&P 500, the benchmark for many index funds, has fallen 16.8 percent from its high in September. Of eight major asset classes tracked by Bloomberg, just two are on track to deliver positive total returns this year.
The yield curve between two-year and 10-year notes flattened to 9 basis points, matching the difference in yields reached on December 4, which was the narrowest since 2007. France's CAC 40 was little changed.
Germany's DAX rose 0.2 percent and the FTSE 100 in Britain added 0.1 percent. Indexes in Italy, Portugal and Spain took bigger losses.
Asian markets took their cue from Wall Street, with Tokyo's Nikkei 225 falling 2.74%, Hong Kong's Hang Seng index falling 1.13%, and Sydney's ASX 200 index falling 1.1%.
Shares turned sharply lower after President Donald Trump hardened his demands in the showdown with Congress over funding the government. The euro gained to $1.1454 from $1.1447.