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Stocks have their worst day since October as Big Tech sinks

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Technology companies led a broad sell-off in stocks Wednesday, knocking more than 600 points off the Dow Jones industrial average and handing the market its worst day in nearly three months.

The Standard & Poor’s 500 index fell 2.6%, its biggest single-day drop since it lost 3.5% on October 28. It had set a record high just two days earlier. The Dow and tech-heavy Nasdaq composite also fell more than 2%. The sell-off left the S&P 500 and Dow in the red for the year.

A measure of fear in the U.S. stock market, the VIX index, surged more than 60%. Treasury yields edged lower, a sign of caution in the market.

Facebook, Netflix and Google’s parent company, Alphabet, led the pullback, which started early in the day as investors sized up the latest batch of company earnings reports. The market’s skid accelerated toward the end of the day, following the release of a largely expected interest rate policy and economic update by the Federal Reserve.

The sharp selling is a shift from the market’s recent record-setting run and comes as investors focus on the outlook for the economy and corporate profits amid a still-raging COVID-19 pandemic.

Expectations on Wall Street have been rising in recent weeks for a big economic financial boost from the Biden administration, which has proposed a $1.9-trillion stimulus plan. But Democrats’ slim majority in the Senate has raised doubts about how soon more aid might arrive and whether such a package will end up being scaled back by spending-wary lawmakers.

The S&P 500 fell 98.85 points to 3,750.77. The Dow lost 633.87 points, or 2%, to 30,303.17. The Nasdaq slid 355.47 points, or 2.6%, to 13,270.60. The Russell 2000 index of smaller companies gave up 41.16 points, or 1.9%, to 2,108.70.

The Federal Reserve announced Wednesday that it would keep its low interest rate policies in place even well after the economy has sustained a recovery from the pandemic. In a statement after its latest policy meeting, Fed officials said they were keeping their benchmark short-term rate pegged near zero and said they would keep buying Treasury and mortgage bonds to restrain longer-term borrowing rates and support the economy.

Meanwhile, investors continued to focus on the profit prospects for corporate America. This is the busiest week of quarterly earnings reporting season for U.S. companies. More than 100 companies in the S&P 500 are scheduled to tell investors this week how they fared during the last three months of 2020.

As a whole, analysts expect S&P 500 companies to say their fourth-quarter profits fell 5% from a year earlier. That’s a milder drop than the 9.4% they were forecasting earlier this month, according to FactSet.

Shares of GameStop more than doubled as the money-losing video game retailer remains caught in a tug of war between Wall Street institutions and an activist community of online investors. Those investors have bet that hedge funds have put too much money in bets against the stock, a concept known as selling short. A pair of professional investment firms that placed big bets that GameStop’s stock would crash have largely abandoned their positions.

Boeing dropped 4% after the aircraft manufacturer posted its largest annual loss in the company’s history, mostly due to the grounding of Boeing’s 737 Max fleet.

Markets have meandered since last week as investors weighed solid corporate earnings results against renewed worries that troubles with COVID-19 vaccine rollouts and the spread of new variants of coronavirus might delay a recovery from the pandemic.

The fate of President Joe Biden’s stimulus plan, which includes $1,400 checks for most Americans and other support for the economy, remains a question for investors. On Tuesday, Senate Majority Leader Chuck D. Schumer said Democrats are prepared to push ahead with the relief package, even if it means using procedural tools to pass the legislation without Republicans.

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