Svmuu reported that 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 each 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. In response, oil prices rose, with WTI crude climbing over 1% to around $89 per barrel. Tensions in the Middle East also escalated again, following U.S. military strikes on Iranian targets in retaliation for the downing of a U.S. helicopter.
The chip sector continued its correction, with AMD and Broadcom declining for the fourth time in five consecutive trading sessions. This follows an ETF-level retreat of approximately 10% in the sector over the past weekend, which saw a brief rebound before coming under renewed pressure. Market analysts suggest that while some profit-taking is occurring, other investors may be adjusting their portfolios ahead of the upcoming **SpaceX IPO (next Friday)**. Nonetheless, the chip ETF has still risen over 87% year-to-date.
On the macro front, the U.S. core CPI for May rose 0.2% month-over-month, slightly below the expected 0.3%. Year-over-year, it stood at 2.9%, in line with expectations but still above the Federal Reserve's 2% target. The headline CPI rose above 4% year-over-year for the first time in three years. Markets recovered somewhat 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 against the trend. Analysts noted that the recent surge in the semiconductor sector, fueled by the AI boom, has been overly rapid, stretching market sentiment significantly. The current pullback is viewed more as a technical correction rather than a deterioration of fundamentals. (CNBC)