US stocks moved lower on Wednesday as investors grappled with renewed geopolitical tensions in the Middle East, continued weakness in semiconductor stocks, and concerns that inflation could keep the Federal Reserve on a cautious path.
The Dow Jones Industrial Average was down by 334 points. The S&P 500 index fell about 0.57%, while the Nasdaq Composite dropped 0.82%.
The decline followed another difficult session for technology stocks, particularly semiconductor companies, which have come under pressure after months of strong gains driven by enthusiasm surrounding artificial intelligence.
Chip stocks remain under pressure
Semiconductor shares continued to lead the market lower in trading.
Shares of Micron Technology, Advanced Micro Devices, Nvidia, and Broadcom declined again, extending losses that began late last week.
The iShares Semiconductor ETF fell another 1% after reversing course on Tuesday.
The semiconductor sector has experienced sharp swings in recent sessions.
The ETF suffered a 10% decline on Friday before staging a brief rebound on Monday. Selling pressure returned on Tuesday and continued into Wednesday.
Some investors believe the weakness reflects profit-taking after a powerful rally. Others point to concerns that technology valuations have become stretched following the AI-driven surge.
The upcoming SpaceX initial public offering has also become part of the discussion.
Some market participants believe investors are trimming positions in high-flying chip stocks to free up capital ahead of Friday’s expected listing, which is targeting a $75 billion raise at a valuation of $1.75 trillion.
Despite the recent pullback, the semiconductor ETF remains up more than 82% for the year.
Iran tensions lift oil prices
Investor sentiment was also affected by escalating tensions between the United States and Iran.
President Donald Trump said Iran had taken too long to negotiate a deal and warned that the country would now face consequences. Trump wrote that Iran has “taken too long to negotiate a deal that would have been great for them, now they will have to pay the price!!!”
The comments followed military action by US forces against Iran after the reported downing of a US Army Apache helicopter near the Strait of Hormuz.
The developments pushed oil prices higher. West Texas Intermediate crude futures rose around 2%, trading near $90 per barrel, while Brent crude traded above $92 per barrel.
The renewed tensions have added another layer of uncertainty for investors already concerned about inflation and interest rates.
Inflation data offers limited relief
Economic data released Wednesday showed consumer prices rose 4.2% over the 12 months through May, the fastest annual increase since April 2023.
The reading matched economist forecasts and helped futures recover from earlier lows.
Core inflation, which excludes food and energy prices, rose 0.2% on a monthly basis, slightly below expectations.
While the data did not significantly alter expectations for Federal Reserve policy, investors continue to anticipate that rates will remain elevated.
According to CME FedWatch data, investors largely expect the Federal Reserve to keep rates unchanged at its June meeting. However, markets continue to price in at least one quarter-point rate increase before the end of the year.
Among individual movers, Super Micro Computer fell nearly 13% after announcing plans to raise $7 billion to support AI server demand.
Nike slipped after a downgrade from RBC, while trucking companies, including XPO, J.B. Hunt, and Old Dominion, declined after Amazon announced an expansion of its freight services business.
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