Jan. 27 (UPI) -- U.S. stocks took a steep dive Wednesday amid a negative outlook on pandemic recovery from the Federal Reserve and increased concern over heightened speculative trading.
The Dow Jones Industrial Average fell 633.87 points, or 2.05%, while the S&P 500 dropped 2.57% and the Nasdaq Composite declined 2.61% as the Federal Reserve opted to keep the benchmark borrowing rate at its current level of 0% to 0.25%.
"The path of the economy will depend significantly on the course of the virus, including progress on vaccinations," the Federal Open Market Committee said in a statement.
Wednesday's losses marked the Dow's worst day since Oct. 28, and the S&P 500 erased previous gains from 2021, leaving it down 0.1% on the year.
"The economic dislocation has abandoned many lives and created great uncertainty about the future," he said. "Something like 9 million people remain unemployed as a consequence of the pandemic. That's as many people lost their jobs at the peak of the global financial crisis in the great recession. Many small businesses are under pressure and other needs to be address and the path ahead is still uncertain."
Wednesday's decline also came as retail investors from the online community Reddit have targeted heavily shorted stocks, primarily GameStop and AMC Entertainment, and pushed their stock prices higher, causing significant losses to hedge funds.
GameStop stock increased 134.84% to $347.51 per share, while AMC stock skyrocketed 301.21% to $19.90 per share.
"Market participants have watched the [GameStop] phenomena with curiosity and amusement, but the days-long surge in it is eroding market confidence and creating some positioning-driven dislocation," Adam Crisafulli, founder of Vital Knowledge, said.
Wells Fargo on Wednesday banned its advisers from recommending clients buy or sell either of the stocks but Powell said the Fed was not currently considering a rule change to stem the activity.
"Remember, we're focused on maximum employment, price stability, financial stability of, as I defined it, the broad financial sector," he said. "Over the years we consult the fact that we have authority, but it's not something we're looking at right now."