Investing.com -- U.S. stocks fell broadly on Wednesday extending losses from one day earlier, as Federal Reserve chair Janet Yellen warned of the potential dangers from high stock valuations in equities markets.
The Dow Jones Industrial Average, the NASDAQ Composite index and the S&P 500 Composite index all dropped by at least 0.4%, as a late rally spared U.S. stocks from reaching its biggest two-day sell-off since late-January. The Dow lost 86.22 or 0.48% to 17,841.98, nearly dropping into negative territory for the year, while the NASDAQ fell 19.69 or 0.40% to 4,919.64, as it continued to retreat from near-record highs from early last week.
The S&P 500, meanwhile, dropped by 9.31 points or 0.45% to 2,080.15, as all but one of 10 sectors closed in the red. Stocks in the Telecommunication and Utilities sectors lagged, closing down by more than 0.50%, while Consumer Goods led after finishing the session as the only sector in the green.
Speaking at an appearance at the Institute for New Economic Thinking's Finance and Society Conference, Yellen sounded off on the current state of global bond and equities markets. Responding to a question posed by IMF head Christine Lagarde, Yellen indicated that while the Fed is somewhat concerned about financial stability in the equity markets, it is not worried about potential bubbles forming.
"I would highlight that equity market valuations at this point generally are quite high," Yellen said. "There are potential dangers there."
On the Dow, all but four of its 30 components closed lower on Wednesday following Yellen's comments. Procter & Gamble Company (NYSE:PG), the top performer on the Dow, gained 0.22 or 0.27% to end the session at 80.29. Procter & Gamble currently has a PE ratio above 25, a reading that typically indicates that investors expect higher growth in the near-future. The worst performer was Microsoft Corporation (NASDAQ:MSFT), which lost 1.49 or 3.13% to 46.11, as rumors continued to circulate about its potential merger with Salesforce.com Inc (NYSE:CRM).
The biggest gainer on the NASDAQ was Expeditors International Washington (NASDAQ:EXPD), which rose 1.43 or 3.05% to 48.13. Expeditors International finished just ahead of Electronic Arts Inc (NASDAQ:EA), which gained 1.79 or 3.03% to 60.95, after one of the world's largest video game manufacturers posted a record quarter on Tuesday to cap a strong year of earnings. EA also announced that its Board of Directors authorized a new program on Tuesday to repurchase up to $1 billion of EA common stock through a two-year initiative that will run through May 31, 2017.
The worst performer was Alexion Pharmaceuticals Inc (NASDAQ:ALXN), which fell 13.51 or 8.02% to close at 155.04. Earlier on Wednesday, Alexion announced its acquisition of Synageva BioPharma Corp (NASDAQ:GEVA) for a reported $8.4 billion, in an effort to boost its rare disease focus.
On the S&P 500, the top performer was Western Union Company (NYSE:WU), which gained 0.91 or 4.32% to 21.86 after the Colorado-based financial services company refuted reports of a possible merger with Dallas-based Moneygram Int (NASDAQ:MGI). The worst performer was Frontier Communications Corporation (NASDAQ:FTR), which fell 0.80 or 11.80% to 5.95.