By Will Horner and Paul Vigna

The Dow Jones Industrial Average dropped more than 600 points Wednesday amid concerns about Covid-19 vaccine distribution, while traders were also captivated by the frenzied trading in GameStop and other heavily-shorted stocks.

GameStop surged 135% and AMC Entertainment Holdings soared 300%, part of a battle between day traders and short sellers. Both stocks are up more than 700% in January. Until Wednesday, the broader market's moves had been relatively muted in recent sessions, despite the wild swings in a handful of individual stocks.

The blue-chip index declined 634 points, or 2.1%, and the S&P 500 dropped 2.6%. The Nasdaq Composite also lost 2.6%.

Delays in the rollout of Covid-19 vaccines, coupled with lingering lockdown measures, marked a "double whammy" of bad news for investors, said Hani Redha, a portfolio manager at PineBridge Investments.

"I think the market expected that by now we would be talking about loosening, not tightening restrictions," he said. "On the vaccine rollout, this is very problematic for the near term. It is very critical for shaping the growth bounce back, and these issues are just adding more delay to that."

AstraZeneca rebutted reports Wednesday that it had pulled out of a meeting with European Union officials, as a spat between the two groups regarding a vaccine shortfall deepened.

The Biden administration said Tuesday it would purchase enough additional coronavirus shots to vaccinate most of the U.S. with a two-dose regimen by the end of summer.

While questions about the pace of vaccine rollout and the economic recovery are real, they aren't new issues for investors, said Victoria Fernandez, the chief market strategist at Crossmark Global Investments. Given the market's run to new highs, it isn't surprising that investors are a bit worn out.

"I really think it's a hodgepodge of different things and the market is saying, you know what, we're taking a breather," she said.

The most fascinating market dynamic, however, remains the spectacular, day-trader driven gains for heavily shorted stocks like GameStop.

The gains have been driven largely by day traders on the social-media message board Reddit, who have en masse been buying up the stock, squeezing short sellers. After markets closed Tuesday, Tesla Chief Executive Elon Musk tweeted "Gamestonk!!" in an apparent reference to the frenzied trading

GameStop's rise this year on its own comprises nearly a full percentage point of the small-cap S&P 600's gains, according to S&P Dow Jones Indices. The index was up 10.2% through Tuesday. GameStop is now the index's largest issue; at the end of 2020, less than a month ago, it ranked 287.

Another target of the day-trader crowd, AMC was on course for the stock's biggest one-day gain on record.

These massive gains fueled worries that the firms that had bet against them could suffer large losses that would force even more stock selling to cover.

The Reddit crowd's gang-piles into these stocks resembles century-old pump and dump schemes from the 1920s, said Hans Olsen, the chief investment officer at Fiduciary Trust Co.

Back then, stock operators would pool money to pump up the price of a targeted stock. Once the public caught wind of the moves and bought, the operators would sell at a profit. Those schemes of course didn't have a convenient platform like Reddit through which traders could coordinate.

"This is old stuff coming new again," Mr. Olsen said, "and facilitated in a way we haven't seen, by social media."

This kind of trading is a also warning sign that the markets -- driven by central-bank policy toward risk-taking -- are dangerously out of balance, Mr. Olsen said. He wondered whether the Federal Reserve would address it in Chairman Jerome Powell's press conference Wednesday afternoon.

"You talk about systemic risk? This is systemic risk seeding itself. They ought to address it."

In the afternoon, the Federal Reserve said it would maintain its current monetary policies while acknowledging the economy has softened in recent weeks. But the first question Mr. Powell fielded in his press conference was in fact about the trading in GameStop.

He said he wasn't going to comment on a particular stock or day's

market activity. In response to another question about financial bubbles, he downplayed the role of Fed policy in driving asset prices.

In corporate news, investors parsed results from AT&T, Blackstone and Boeing, with earnings from Apple, Facebook and Tesla due just after the market closes. Investors are eager to see how the tech giants fared during a quarter marked by continued lockdowns and stay-at-home orders.

"The bar for tech stocks to beat is quite high because we were still in lockdown and yet they do seem to be doing well relative to those higher expectations," said Mr. Redha.

Shares of Microsoft slipped 0.4% after the company reported record quarterly sales Tuesday. Its shares closed at a new high Tuesday.

Walgreens Boots Alliance was up 4.1% after the drugstore chain named Starbucks operating chief Rosalind Brewer as its next chief executive.

In commodities markets, U.S. crude rose 0.5% to $52.85 a barrel. Gold prices fell 0.3% to $1,844.90. The U.S. 10-year Treasury note's yield was down slightly at 1.01%.

Overseas, the pan-continental Stoxx Europe 600 was down 1.2%, while in Asia, stock indexes were mixed. Japan's Nikkei 225 rose 0.3%, Hong Kong's Hang Seng fell 0.3%, while in mainland China, the Shanghai Composite edged up 0.1%.

Write to Will Horner at William.Horner@wsj.com and Paul Vigna at paul.vigna@wsj.com

(END) Dow Jones Newswires

01-27-21 1619ET