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US Stocks Log Worst Day Since October 01/27 16:00
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.
(AP) -- 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 S&P 500 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 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 coronavirus pandemic.
Expectations on Wall Street built up 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 reality is setting in that the package won't be quite as big and maybe
a little bit delayed," said Sal Bruno, chief investment officer at IndexIQ.
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 viral pandemic. In a statement after its latest policy meeting, Fed
officials said they are 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 so far 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
profit 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 betting 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 real economy isn't reflective of what's happening in financial markets
and there really is a disconnect there," said Charlie Ripley, senior investment
strategist for Allianz Investment Management. "Investors have to be mindful of
that gap."
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 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.
"That's certainly one of the factors putting a little bit of pressure on
markets," Ripley said. "Maybe that's just the realization that growth
expectations built into market around fiscal stimulus may not come as expected."
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