Stocks ended the day mostly lower on Wednesday, as mounting fears over instability in the Middle East unsettled investors. Meanwhile, inflation data came in softer than expected, easing concerns about rising prices due to U.S. tariffs, while market watchers waited for further clarity on U.S.-China trade negotiations.
Markets gave up earlier gains after reports emerged that the United States was preparing to partially evacuate its embassy in Iraq amid escalating regional threats. Earlier in the day, a top Iranian figure warned that if nuclear talks with Washington fail, U.S. military installations in the area could become targets.
Tech giants Amazon and Nvidia, which had seen notable recent surges, slipped and dragged down the S&P 500 as a result.
Government data revealed that consumer prices in May saw only a slight uptick, helping to calm fears that tariffs would lead to more significant inflation. However, some economists still believe prices could pick up in the months ahead, partly due to President Donald Trump’s tariff policies.
On a year-over-year basis, headline inflation rose 2.4%, slightly under the 2.5% economists had projected in a Reuters poll.
“There’s still concern about Trump’s tariffs being inflationary but this report was better than expected and it fuels hope that the Federal Reserve will be able to step in with rate cuts later on this year,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.
According to the CME Group’s FedWatch tool, traders now see a 70% probability that the Federal Reserve will reduce interest rates by the time of its September meeting.
After officials from the U.S. and China reached a new framework aimed at resuming stalled trade talks, President Donald Trump declared that a deal had been finalized. As part of the agreement, China is expected to deliver magnets and rare earth materials to the United States.
Preliminary figures showed the S&P 500 slipped 15.09 points, or 0.25%, ending the day at 6,023.72. The Nasdaq Composite dropped 93.53 points, or 0.47%, to close at 19,621.46. Meanwhile, the Dow Jones Industrial Average added a modest 5.35 points, or 0.01%, finishing at 42,872.22.
With optimism growing that the U.S. will reach trade settlements that ease Trump’s aggressive tariff stance, the S&P 500 now sits just below its previous high set in February.
“The worst-case scenario is probably behind us. There’s a little bit of face-saving for both sides,” said John Praveen, managing director at Paleo Leon in Princeton, New Jersey. “They got an agreement. The question is whether it will be implemented.”
A White House official shared specifics of the U.S.-China deal, which permits the U.S. to impose a total 55% tariff on Chinese imports—broken down into a 10% base “reciprocal” duty, 20% for fentanyl-related penalties, and 25% from earlier tariffs. In turn, China will apply a 10% tariff on American goods.
U.S. equities have bounced back strongly in recent weeks after dipping in April amid concerns surrounding Trump’s so-called “Liberation Day” tariffs.
GitLab, a provider of software development tools, saw its shares decline after the company’s earnings failed to meet expectations.
GameStop stock also took a hit, following its announcement of weaker revenue in the first quarter.
{Matzav.com}