NEW YORK - The stock market fell the most in more than a month as investors assessed weak earnings reports from several U.S. companies.
Health care stocks had some of the biggest declines. Laboratory Corporation of America slumped after cutting its full-year earnings forecast. Quest Diagnostics, a major competitor, also dropped.
The broader stock market also fell. The Standard & Poor's 500 index has fallen six out of eight days in December, leaving it down 1.3 percent for the month.
The market may be succumbing to "buyer's fatigue" after a big rally this year, said Chris Bertelsen, chief investment officer at Global Financial Private Capital. The S&P 500 has surged 25 percent so far in 2013, putting it on track for its biggest annual increase in a decade.
"Anybody who thinks that it's up forever is certainly a neophyte to this business," said Bertelsen.
Another sign that investors' optimism on stocks may be flagging was a sharp drop in the Russell 2000, an index of small-company stocks. The index, which has surged 30 percent this year, leading the gains for major indexes, fell 1.6 percent Wednesday, the most in a month.
Investors also considered the impact of the latest budget deal in Washington, which will avert the immediate threat of another shutdown of the federal government. The 16-day shutdown in October crimped economic growth and hurt consumer confidence.
In the long run, the deal should be good for the stock market because it will allow investors to focus on the economy and the outlook for corporations rather than having to worry about politics, said Peter Sidoti, a former Wall Street analyst who now runs a company that focuses on analyzing small-company stocks.
"It just gets rid of the noise," said Sidoti, CEO of Sidoti & Co. "The less distractions that you have and the more that you have people focus on running their businesses, the better off we are."
The S&P 500 index fell 20.40 points, or 1.2 percent, to 1,782.22. It was the biggest slump for the index since Nov. 7.
The Dow Jones industrial average dropped 129.60 points, or 0.8 percent, to 15,843.53. The Nasdaq composite fell 56.68 points, or 1.4 percent, to 4,003.81.
Health care stocks slid 1.6 percent. Laboratory Corporation of America plunged $10.90, or 11 percent, to $88.25, the biggest decline in the S&P 500. Quest Diagnostics fell $3.40, or 5.8 percent, to $55.20.
Some investors also attributed Wednesday's slump to concern that the Federal Reserve could start to reduce its economic stimulus at its policy meeting that starts next Tuesday. That outcome appeared to become more likely following some strong economic reports recently, including a pickup in hiring last month.
The Fed has been buying $85 billion of bonds every month to hold down long-term interest rates. Ultimately, most investors see a potential reduction, or "tapering," of that stimulus as a positive signal that shows the economy is strengthening.
In the short run, however, any decrease in the Fed's huge bond purchases would likely create some anxiety in financial markets. The purchases have been driving bond prices higher and giving investors an incentive to buy stocks by making them seem less expensive in comparison.
Wednesday's drop "has probably more to do with anticipation of the Fed, than anything else," said Omar Aguilar, chief investment officer for equities at Schwab. "People are making the assumption that the tapering will happen sometime between now and February."
In government bond trading, the yield on the 10-year Treasury note rose to 2.85 percent from 2.80 percent on Tuesday.
In commodities trading, the price of oil fell $1.07, or 1.1 percent, to $97.44 a barrel. Gold fell $3.90, or 0.3 percent, to $1,257.20 an ounce.