Inflation in the US is at a four decades-high and the US economy has shrunk for two consecutive quarters.
In many countries, that milestone would be considered an economic recession, but it is not classed as such in the US, which uses additional data to make that call.
Monday's fall extended sharp losses on Friday when Mr Powell told a gathering of central bankers at the Jackson Hole Economic Symposium in Wyoming that the US Fed would act forcefully to control inflation, but it would cause some pain for households and businesses.
He said that restoring price stability will take some time and requires us to use our tools to bring demand and supply into a better balance.
There will be some pain for households and businesses as a result of higher interest rates, slower growth and softer labor market conditions. These are the costs of reducing inflation. If price stability is not restored, it would mean far greater pain. The Dow Jones closed 0.57% lower on Monday, while the S&P 500 was down 0.67% and the Nasdaq was down by 1.02%.
The drop follows a sharp fall on Wall Street on Friday, with all three benchmarks more than 3% lower. The Nasdaq has had its worst day since June.
Technology stocks of Apple, Microsoft Corp and Tesla Inc were all down between 1.07% and 1.37% at the close of trading on Monday.
Rod von Lipsey, the managing director at UBS Private Wealth Management, said investors are coming to terms with the idea that the Fed is serious about curbing inflation.
In response to spiralling prices, the central bank has raised interest rates in recent months. The rate of borrowing makes it more expensive for individuals and companies, which could slow economic growth as well as inflation.