Robert Shiller, winner of the Nobel Prize in economics, told CNBC on Thursday that he's concerned about the upheaval in the stock market and signs of a slowdown in the economy.

"I am worried about these markets and about a recession," warned the Yale University professor on "Squawk on the Street." "The turmoil in the market, it's more the theory that we're hearing that some correction is overdue, than any specific action of the Fed." He pointed out, "We've had a very highly priced stock market and housing market and bond market."

The Federal Reserve's decision Wednesday to increase interest rates for the fourth time in 2018 and project two hikes next year was "reasonable on the basics," given the persistence of the economic recovery since the 2008 financial crisis.

Shiller, co-creator of the S&P Case/Shiller home prices index, does recognize that pockets of the economy, especially housing, have been coming under pressure. "There a lot of indicators showing softening" in housing, he said. "It is worrisome."

But the small rate hike from the Fed should not really impact real estate that much and should not be upsetting the financial markets to this extent, he contended.

Wall Street does not agree. The Dow Jones Industrial Average opened nearly 100 points lower Thursday and accelerated to the downside by midday. The Dow sank 351 points Wednesday, closing at a 13-month low and sliding further into correction territory, after the Fed's move on rates. The correction in the was getting worse on Thursday, while the Nasdaq touched a bear market.

(A correction is defined as a decline in an asset or index of 10 percent or more from recent highs. Meanwhile, a bear market is measured by a drop of 20 percent or more from recent highs.)

Meanwhile, Shiller praised Fed Chairman Jerome Powell as "levelheaded," saying he's impressed with what the central bank chief is doing to normalize rates. The Yale economist said the Fed is being "very reasonable" and it's "not out of bounds at all."

Powell has not been very popular on Wall Street or in Washington, with many traders and investors wondering why rates need to still go up and President Donald Trump openly and repeatedly castigating Powell before Wednesday's rate increase.