Just when dollar bears and Treasury bulls thought the pain was finally over, the previously discussed hawkish Powell comments hit the tape.

In a remarkable sequence of comments, Powell basically said that not only is the Fed not worried about stifling growth by tightening too much, he took the opportunity to underscore why he remains so complacent about the US economy, saying "it’s a remarkably positive set of economic circumstances”, and “there’s no reason to think it can’t continue for quite some time".

Powell also praised the recent wage increases, saying some gains are welcome and noting that "the Phillips curve is not dead, just resting" and repeated what he said after the last week's FOMC announcement, saying that "interest rates are still accommodative" because "rates have just now, in real terms, moved above zero."

And here is the reason for dollar bear pain after hours: Powell said that not only are rates far away from the neutral rate of interest - or the interest rate that neither stimulates nor holds back the economy - suggesting that the Fed will keep hiking for a long time, but that the Fed may also go past "neutral" as the tightening process continues:

"interest rates are still accommodative, but we’re gradually moving to a place where they’ll be neutral - - not that they’ll be restraining the economy. We may go past neutral. But we’re a long way from neutral at this point, probably".

And whether it was after-hours momentum, or Powell's unexpected hawkishness that the Fed is a "long way from neutral", today's dramatic surge in yields and the dollar, and the plunge in the Euro, accelerated after hours. And, as shown below, once EURUSD took out the 1.15 stops, the pair tumbled as low as 1.147, the lowest level since late August...

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... while the 10Y Yield continued its relentless levitation to the highest level in 7 years... 

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... a move which during the cash session finally sent stock reeling amid concerns that rate had risen too far, too fast.

As for the dollar, it surged above 96 and is now putting enough pressure on financial conditions to hit S&P futures.

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Which is ironic, because, during his speech, Powell said that "we don't detect financial instability as elevated now." Well, a few more such comments, and he will.

And with the dollar now in a blast off mode, we hope the emerging markets enjoyed their brief respite and got their affairs in order because overnight it's about to get ugly again.