* All eyes on Fed's policy meeting later this week
* Indexes: Dow down 1.8%, S&P 500 down 1.7%, Nasdaq down 2.2%
NEW YORK, Sept 20 (Reuters) - Wall Street fell in a broad sell-off on Monday, with the S&P 500 and Nasdaq suffering their biggest daily percentage drops since May.
The Nasdaq also hit its lowest level in about a month, but indexes pared losses just before the close to end well off their lows of the session. The Nasdaq was down more than 3% during the day.
Microsoft Corp, Alphabet Inc, Amazon.com Inc, Apple Inc, Facebook Inc and Tesla Inc were among the biggest drags on the Nasdaq and the S&P 500.
All 11 major S&P 500 sectors were lower, with economically sensitive groups like energy, which fell 3%, down the most. Defensive sectors including utilities were down the least.
Investors also were nervous ahead of the Federal Reserve's policy meeting this week.
The banking sub-index dropped 2.9% while U.S. Treasury prices rose.
Wednesday will bring the results of the Fed's policy meeting, where the central bank is expected to lay the groundwork for a tapering, although the consensus is for an actual announcement to be delayed until the November or December meetings.
The Dow Jones Industrial Average fell 614.41 points, or 1.78%, to 33,970.47, the S&P 500 lost 75.26 points, or 1.70%, to 4,357.73 and the Nasdaq Composite dropped 330.07 points, or 2.19%, to 14,713.90.
The Dow registered its biggest daily percentage drop since July, while the CBOE volatility index, known as Wall Street's fear gauge, rose.
The S&P 500 is now down about 4% from its Sept. 2 record high close.
Strategists at Morgan Stanley said they expected a 10% correction in the S&P 500 as the Fed starts to unwind its monetary support, adding that signs of stalling economic growth could deepen it to 20%.
Most airline carriers ended higher after the United States announced it will relax travel restrictions in November on passengers from China, India, Britain and many other European countries who have received COVID-19 vaccines.
Declining issues outnumbered advancing ones on the NYSE by a 5.40-to-1 ratio; on Nasdaq, a 4.66-to-1 ratio favored decliners.
The S&P 500 posted no new 52-week highs and three new lows; the Nasdaq Composite recorded 23 new highs and 193 new lows.
Volume on U.S. exchanges was 12.24 billion shares, compared with the 9.89 billion average for the full session over the last 20 trading days.