Inflation hits three-year high, dragging down U.S. stock market; Dow falls, chip stocks remain under pressure
Odaily News U.S. 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 both declined by 0.3%.
Market sentiment was notably impacted by geopolitical shocks. Trump stated that negotiations with Iran were "taking too long" and threatened 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, following U.S. military strikes on Iranian targets in response to the downing of a U.S. helicopter.
The chip sector continued its correction, with AMD and Broadcom declining for the fourth time in the last five trading sessions. The sector had already experienced an ETF-level pullback of about 10% over the previous weekend, followed by a brief rebound before coming under renewed pressure. Market participants believe that while some profit-taking is occurring, other investors may be adjusting their portfolios in anticipation of the upcoming SpaceX IPO (next Friday). Despite this, chip ETFs are still up over 87% year-to-date.
On the macro front, U.S. core CPI rose 0.2% month-over-month in May, slightly below the expected 0.3%. Year-over-year, it came in at 2.9%, matching expectations but remaining above the Fed's 2% target. Headline CPI increased to over 4% year-over-year, the first time in three years. Markets recovered somewhat from session lows following the data release.
In the previous trading session, chip stocks dragged down the S&P 500 and Nasdaq, while the Dow closed higher against the trend. Analysts pointed out that the recent surge in semiconductor stocks, driven by the AI boom, had become too rapid, stretching market sentiment. The current pullback is more of a technical correction rather than a deterioration in fundamentals. (CNBC)
