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Dow drops 630 points, stocks have worst day since October as Big Tech sinks

The selling was broad, though technology giants including Facebook, Netflix and Google’s parent company accounted for a big part of the drop.

The stock market posted its biggest drop since October Wednesday, led by declines in several Big Tech companies. 

The Dow Jones fell more than 600 points. The S&P 500 gave up 2.6%. The benchmark index had set a record high just two days earlier. 

The selling was broad, though technology giants including Facebook, Netflix and Google’s parent company accounted for a big part of the pullback. 

The stock of beleaguered video game seller GameStop more than doubled as an army of small investors ganged up against hedge funds that made huge bets that the stock would fall. 

The Federal Reserve stressed its commitment to keep interest rates low. 

Stocks were down from the get-go as investors focused on the outlook for the economy and corporate profits amid a still-raging coronavirus pandemic. The selling accelerated toward the end of the day, following the Federal Reserve's latest interest rate and economic policy statement.

The selling comes amid uncertainty over whether the Biden administration will deliver on its proposed $1.9 trillion stimulus plan. 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. Expectations for another economic financial boost from Uncle Sam helped keep stocks climbing since the U.S. elections in November.

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“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.

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. Apple and Facebook will report their quarterly results after Wednesday's closing bell.

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.

Credit: AP
The Wall Street street sign is framed by a giant American flag hanging on the New York Stock Exchange, in a Monday, Sept. 21, 2020 file photo. (AP Photo/Mary Altaffer, File)