The margined buyer starts paying more for borrowing. The brokers get nervous that the markets are going to take a hit and they raise margin rates for many stocks. The underwriters begin to get nervous that merchandise won't sell and they will be long it. The asset allocators, the Abby Joseph Cohens , get nervous because they know from history that you can't fight the Fed. That leads to them recommending that people pull money out of the market.
People do it.
The market comes down some more. But it doesn't matter. The economy is complex, lots of it revolves around debt, and when the price of money goes higher, less is spent. End of story. As long as the economy stays hot, the Fed is capable of taking rates up and up and up until all economic activity is impacted and the economy goes into recession.