U.S. stocks moved lower on Wednesday as investors digested several sources of pressure at the same time: continued selling in the chip sector, escalating geopolitical tensions, and inflation data that showed headline price growth rising above expectations. The Dow Jones Industrial Average fell 374 points, or 0.7%, while both the S&P 500 and the Nasdaq Composite declined 0.3%.
The session followed a prior trading day in which chip shares had already weighed on the S&P 500 and the Nasdaq, even as the Dow managed to close higher. On Wednesday, however, the weakness broadened across the major indexes. Market sentiment was affected by geopolitical developments after Trump said negotiations with Iran were “taking too long” and threatened further action. Oil prices rose in response, with WTI crude briefly gaining more than 1% to trade around $89 per barrel.
Tensions in the Middle East also intensified again after U.S. forces struck Iranian targets in response to the downing of a U.S. military helicopter. The rise in oil prices added another factor for equity investors to absorb alongside the inflation report and the ongoing correction in semiconductor names.
Chip stocks remained under pressure. AMD and Broadcom fell for the fourth time in five trading sessions. The broader chip group had already experienced an ETF-level pullback of about 10% late last week, then staged a brief rebound before coming under renewed selling pressure. Market participants said the move reflected profit-taking, while some investors were also adjusting portfolio positioning ahead of the upcoming SpaceX IPO next Friday. Despite the recent decline, the chip ETF remained up more than 87% for the year.
On the macroeconomic side, U.S. core CPI rose 0.2% month over month in May, slightly below the expected 0.3%. On a year-over-year basis, core CPI came in at 2.9%, matching expectations but still above the Federal Reserve’s 2% target. Headline CPI rose to more than 4% year over year, marking the first such reading in three years. After the inflation data was released, stocks recovered somewhat from their lows.
Analysts noted that the semiconductor rally fueled by the AI boom had advanced quickly, leaving sentiment significantly stretched. In that context, the current pullback was described more as a technical correction than a deterioration in fundamentals. For Wednesday’s market action, the combination of inflation, chip-sector weakness and renewed Middle East tension kept U.S. equities under pressure.