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Stocks plummeted toward bear country, led by the Nasdaq Composite Index, and Wall Street's preferred fear gauge rocketed higher Thursday. And strategists say the selling will get worse before it gets better. After the Federal Reserve spooked markets Wednesday, risk assets and stocks have been reeling, with some of the sharpest losses on Thursday in growth sectors like biotech and technology. That weighed hard on the Nasdaq, which closed down 1.6 percent after falling temporarily into a bear market, down more than 20 percent from its recent high during most of the day. The Dow fell 454 to 22,859, closing below he psychological 23,000 level, and the was off 1.6 percent at 2,467, or 16 percent from its highs.

The CBOE Volatility Index jumped above 30, its highest since the major market sell-off in February of this year. It was at 28.53 in late trading. "The market's in no man's land," said Peter Boockvar, chief investment strategist at Bleakley Advisory Group. Stocks have broken through the lows of the year, and technicians are scurrying to find the next support levels. On the S&P 500, he said 2,400 is a potential psychological area of support. The market plunged Thursday against the backdrop of a congressional feud with the White House over a continuing budget resolution, but the markets were more focused on the worries that have been festering over global growth and the potential for recession. "You can guarantee if the government shuts down it's going to very soon reopen," said Boockvar. "This could be a carry through from yesterday, that's legitimate. The problem now is this is the first time in years in this bull market that people are doing tax-loss selling. That's helping to exaggerate the move. You're also having redemptions." Since the Fed announced its rate hike Wednesday, the Dow was down 815 points. The sharp drop in stocks since early October was unexpected and even more crushing recently, since December is typically a positive time for stocks. The 10 percent decline so far in the S&P 500 is its worst December performance since 1931. If it remains this way, it would the first time ever that December is the worst month of the year for the index. "It is entirely possible that looking out over the next three to six moths this correction turns into what you would call a bear market because of the fact that the Fed really didn't show sufficient sensitivity to the affect of policy tightening on the speed of asset price changes to the downside," said Julian Emanuel, chief equity and derivatives strategist at BTIG. Emanuel said he's not yet worried about a recession, but fears the Fed will make a policy mistake that could bring one on.

Trade war turnaround?

But the Fed is not the only worry. Also topping the list is the uncertainty surrounding the trade negotiations between the U.S. and China. The Chinese economy is already weakening, and investors worry weaker global growth will spread to the U.S., where the housing sector has begun to show weakness as the Fed raised interest rates. "From our point of view time wise, we think this correction has further to run, consistent with the past over 10 percent corrections since March 2000," Emanuel said. "Does it have further to run? That will be much more dependent on whether the data starts turning down in a much more meaningful way, and if there's no signs of tangible ... progress in negotiations with China." He added that the broader problems with China could continue but there's still potential for a trade deal before the March deadline, which could appease markets. Another big concern is a major slowdown in earnings growth. Market consensus is for 7.5 percent growth in 2019 in S&P 500 earnings, down from more than 20 percent this year. Ed Keon, QMA chief investment strategist and portfolio manager, said his forecast is even more negative — at zero growth. "How I interpret the market action yesterday and today, I think it basically means the market's convinced it's already too late for the Fed. We already have rates that are high enough to push us into at least a growth recession," he said.

'Worse before it gets better'