Inflation at three-year high weighs on US stock market, Dow falls, chip stocks continue to face pressure

Odaily Odaily reports that US stocks weakened on Wednesday as investors digested a sell-off in the chip sector, escalating geopolitical tensions, and higher-than-expected inflation data. The Dow Jones Industrial Average fell 374 points (0.7%), while the S&P 500 and the Nasdaq Composite each dropped 0.3%.

Market sentiment was clearly impacted by geopolitical shocks. Trump stated that negotiations with Iran were "taking too long" and threatened to take further action. As a result, oil prices rose, with WTI crude briefly gaining over 1% to around $89 per barrel. Tensions also flared up again in the Middle East after US forces struck Iranian targets in response to the downing of a US helicopter.

The chip sector continued its correction, with AMD and Broadcom falling for the fourth time in five consecutive trading days. The sector had previously experienced an ETF-level pullback of about 10% over the weekend, followed by a brief rebound before coming under pressure again. Market participants believe that while some profit-taking is occurring, some investors may be adjusting their portfolios in anticipation of the upcoming **SpaceX IPO (next Friday)** . Despite this, the chip ETF is still up over 87% year-to-date.

On the macro front, US core CPI rose 0.2% month-over-month in May, slightly below the expected 0.3%; the year-over-year rate was 2.9%, in line with expectations but still above the Fed's 2% target. Headline CPI climbed above 4% year-over-year for the first time in three years. Markets rebounded from their lows following the data release.

In the previous trading session, chip stocks dragged down the S&P 500 and the Nasdaq, while the Dow managed to close higher. Analysts pointed out that the recent rally in the semiconductor sector, fueled by the AI boom, had become too rapid, and market sentiment was significantly stretched. The current pullback is seen more as a technical correction rather than a deterioration in fundamentals. (CNBC)