Stock markets closed with significant losses on Wednesday, even as the Federal Reserve held holdings close to zero amid unusual trading activity fueled by online amateur investors.
The Dow Jones Industrial Average lost 635 points, or 2.1 percent, the largest drop in the past three months, while the S&P 500 erased its gains for the year at 98.8 points or 2.6 percent.
The cuts were not deterred by Federal Reserve Chairman Jerome Powell, who supported additional fiscal support and rejected concerns that it would spike inflation.
President Biden is pushing for a $ 1.9 trillion COVID-19 aid package.
But the markets, which have been growing steadily since the original shock of the pandemic early last year, fell amid an unusual phenomenon of amateur investors targeting particular stocks and sending their valuations through the roof, upsetting short sellers.
Companies like GameStop have seen their valuations rise and fall at extraordinary rates as online investment boards on sites such as Reddit have attacked them. GameStop’s value has increased sixfold since the beginning of the year. Large hedge funds betting that stocks would fall have been cornered and likely have accumulated significant losses.