U.S. equities tumbled as a risk-off mood descended on markets amid growing concern that stocks have become overvalued. The dollar jumped the most since September and Treasury yields slipped.

The S&P 500 Index recorded its worst rout since October, with the gauge down 2.6 per cent after Federal Reserve officials left their main interest rate unchanged without promising any more aid for the economy. The selloff was widespread, sinking all 11 groups in the benchmark stock gauge. Turmoil continued in pockets of the market where retail traders are becoming a dominant force, with shares of GameStop Corp. and AMC Entertainment Holdings Inc. soaring as investment pros questioned whether there’s any rationale behind the moves.

The Stoxx Europe 600 Index declined the most in five weeks as the European Union and AstraZeneca Plc squabbled over vaccine delivery delays. The euro fell after a European Central Bank official said the markets are underestimating the odds of a rate cut. Officials in the U.K. announced new rules to try to curb the spread of COVID-19 and Germany cut its 2021 economic growth forecast to 3 per cent from 4.4 per cent.

An extended run higher for stocks has reversed this week as investors look to a spate of earnings releases for clues about the health of the corporate world. Federal Reserve Chairman Jerome Powell said at a press conference that the U.S. economy was a long way from full recovery and still short of policy makers’ inflation and job goals.

“It was always doubtful the Fed would announce any new actions this month,” said Seema Shah, chief strategist at Principal Global Investors. “After a few weeks of Fed speakers pushing back on the monetary tightening narrative, it wasn’t surprising to hear Powell reassert the message that tapering is not on the agenda for 2021.”

The stock selloff is also being driven partly by speculation that hedge funds will be forced to reduce their equity holdings as retail investors make a concerted effort to boost shares the professional investors have bet against, according to Matt Maley, chief market strategist at Miller Tabak + Co.

“A lot of them are getting burned by their shorts, and I think the market is worried that they’ll have to sell some stocks to meet their margin calls,” he said.

Elsewhere, Bitcoin fell below US$30,000 before paring the decline and precious metals slumped. Asian stocks fell for a second day as investors took a breather following the regional benchmark’s ascent to a record high Monday. In the region, benchmarks in India, Vietnam and the Philippines were among the biggest losers.

These are the main moves in markets:

Stocks

The S&P 500 Index fell 2.6 per cent as of 4 p.m. New York time.
The Stoxx Europe 600 Index declined 1.2 per cent.
The MSCI Asia Pacific Index fell 0.8 per cent.
The MSCI Emerging Market Index dipped 1.3 per cent.

Currencies

The Bloomberg Dollar Spot Index rose 0.7 per cent.
The euro fell 0.5 per cent to US$1.2104.
The British pound weakened 0.4 per cent to US$1.3683.
The Japanese yen fell 0.5 per cent to 104.18 per dollar.

Bonds

The yield on 10-year Treasuries fell one basis point to 1.02 per cent.
Germany’s 10-year yield fell one basis point to -0.55 per cent.
Britain’s 10-year yield was little changed at 0.27 per cent.

Commodities

West Texas Intermediate crude rose 0.1 per cent to US$52.67 per barrel.
Gold fell 0.5 per cent to US$1,842.36 an ounce.