Dow Plunges on Worst Day Since October

U.S. stocks fell sharply on Wednesday amid disappointing earnings, while concern about heightened speculative trading activity deepened.

The Dow Jones Industrials tumbled 633.87 points, or 2.1%, to end Wednesday at 30, 303.17, for its worst day since Oct. 28.

The S&P 500 gave back 98.85 points, or 2.6%, to 3,750.77, slipping from a record high and suffering its biggest drop in three months.

Wednesday’s steep losses wiped out the 2021 gains for the S&P 500 and it’s now down 0.1% on the year.

The NASDAQ was in the red 181.66 points, or 1.3%, to 13,444.41.

Boeing fell nearly 4% after its earnings report showed its 2020 net loss hit a record of $11.9 billion amid the 737 Max grounding and the coronavirus pandemic. Shares of AMD tumbled more than 6% even after the chipmaker posted revenue and earnings that beat Wall Street’s already high expectations.

But it was intensifying speculative behavior among retail investors that was causing the most concern. Heavily shorted names, including GameStop and AMC Entertainment, continued to be pushed higher by amateur day traders in online chat rooms.

Some investors are worried about mounting losses by hedge funds spilling over to other areas of the market as those funds sell other securities to raise cash. Investors are also concerned the speculative behavior is a sign the market is overvalued and a pullback is near.

GameStop shares exploded again, more than doubling on Wednesday. Media outlets reported Melvin Capital, the hedge fund targeted by the retail investing crowd on Reddit had sold out of its short position.

AMC soared more than 300% Wednesday. More than one billion AMC shares traded in the name during the session.

Microsoft gained 0.3% after reporting a stellar quarter. Sales grew by 17% on a year-over-year basis in its fiscal second quarter, while its cloud business accelerated.

The Federal Reserve failed to stem the market selloff even as it said it would kept interest rates unchanged near zero, while maintaining an asset purchasing program with at least $120 billion buying a month.

Prices for 10-Year Treasurys were higher, lowering yields to 1.02% from Tuesday’s 1.04%. Treasury prices and yields move in opposite directions.

Oil prices eased back two cents to $52.59 U.S. a barrel.

Gold prices faded $8.80 to $1,842.10 U.S. an ounce.