The Dow Jones Industrial Average closed the day down 345.95 points, or 1.11%, after dropping as much as 700 points earlier in the day. The S&P 500 declined 1.34% and the Nasdaq Composite dropped 2.11%.
Investors have been closely watching the 10-year treasury bond yield after it climbed to a record high above 1.6% in what some described as a "flash" spike last week.
Powell on Thursday said the process of economic recovery could "create some upward pressure on prices" adding that the Federal Reserve will remain "patient" before making policy changes to combat inflation.
He also said increasing interest rates would require the economy to return to full employment and a sustainable level of inflation above 2%, which he said he didn't expect to happen this year.
"There's just a lot of ground to cover before we get to that," he said.
Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, told The Wall Street Journal that interest rates are likely to go higher, which would be "particularly bad for the types of stocks that led the market higher for the past year."
Thursday saw continued selloffs in tech stocks as Tesla fell 4.86% and Apple dropped 1.58%.
The tech-heavy Nasdaq was down 1.3% for the year after Thursday's losses while also falling into correction territory, down more than 10% from its recent high on an intraday basis.