The Dow and S&P 500 registered their biggest daily percentage drops in two months on Wednesday after Federal Reserve Chair Jerome Powell dampened expectations for further cuts following the central bank's first interest rate cut in a decade.

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All three major US stock indexes ended the session lower after Powell said today's move was not the beginning of a lengthy rate-cutting cycle.

"My feeling is that what started off the firestorm was a comment by Powell that suggested we're one and done," said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.

Despite today's sell-off, all three indexes posted their second straight monthly gains in July, closing the book on a month in which the S&P 500 and the Nasdaq reached fresh record highs.

"I always take the (market's) knee-jerk reaction with a grain of salt, because the first reaction is often wrong," said Jeff Mortimer, director of investment strategy at BNY Mellon Wealth Management.

"Maybe some were expecting more from the Fed," Mortimer added. "But there are plenty of buyers waiting to absorb what these sellers are selling."

Investors were expecting the Fed's 25-basis point cut as insurance against signs of a looming economic slowdown amid the protracted US-China trade war.

The latest round of trade talks wrapped up in Shanghai, with US and Chinese negotiators leaving the table without a deal. Both sides called the talks "constructive."

"Markets are preparing themselves for long, extended trade negotiations," Mortimer said. "There was no progress, but the markets had already priced it in."

The Dow Jones Industrial Average fell 333.75 points, or 1.23 percent, to 26,864.27, the S&P 500 lost 32.8 points, or 1.09 percent, to 2,980.38 and the Nasdaq Composite dropped 98.20 points, or 1.19 percent, to 8,175.42.

All 11 major sectors in the S&P 500 closed in the red, with consumer staples, materials and technology suffering the largest percentage losses.

Of the 296 companies in the S&P 500 that have reported second-quarter earnings so far, 74.7 percent have surprised Street estimates to the upside, according to Refinitiv data.

Analysts now see total growth of 1.3 percent for the quarter, up from just 0.3 percent seen at the beginning of the month, per Refinitiv.

Apple Inc extended its gains, rising 2.0 percent after an increase in services and wearables more than offset a drop in iPhone sales.

Humana Inc advanced 4.3 percent after the health insurer beat analysts' second-quarter earnings estimates and hiked its 2019 forecast.

Video game maker Electronic Arts Inc reported better-than-expected quarterly revenue, driven by continued success of its battle royale game "Apex Legends," sending its stock up 4.4 percent.

Among losers, shares of General Electric Co dipped 0.7 percent after the conglomerate posted a quarterly loss and announced the retirement of its Chief Financial Officer Jamie Miller.

Chipmaker Advanced Micro Devices Inc slumped 10.1 percent after its disappointing third-quarter revenue forecast, dragging the Philadelphia Semiconductor index down 3.2 percent.

Molson Coors Brewing Co dropped 5.1 percent after missing quarterly profit expectations and announcing the retirement of Chief Executive Officer Mark Hunter.

Declining issues outnumbered advancing ones on the NYSE by a 1.77-to-1 ratio; on Nasdaq, a 2.15-to-1 ratio favored decliners.

The S&P 500 posted 32 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 109 new highs and 80 new lows.

Volume on US exchanges was 8.92 billion shares, compared with the 6.19 billion average over the last 20 trading days.