US stock markets opened lower on Wednesday evening, Beijing time. Investors are digesting the recent record-breaking rally and monitoring the latest developments in the Middle East. The US May ADP report showed private sector employment increased by 122,000, exceeding expectations. Concerns that US-Iranian conflict could continue to push inflation higher have driven up both oil prices and US Treasury yields.
The Dow Jones Industrial Average fell 231.29 points, or 0.45%, to 51,076.50. The Nasdaq Composite dropped 12.28 points to 27,081.62, while the S&P 500 declined by 8.97 points, or 0.12%, to 7,600.81.
Oil prices rose following a new round of mutual strikes between the US and Iran. Early Wednesday, West Texas Intermediate crude futures gained 2% to around $96 per barrel, while Brent crude rose 2% to approximately $98 per barrel.
Late Tuesday, Kuwait's military announced on social media that its air defense systems were "intercepting hostile targets." The US Central Command later stated that US forces had successfully intercepted Iranian ballistic missiles and drones and conducted a "defensive strike" on Qeshm Island "in response to Iran's attack attempts in the Middle East."
US President Trump also commented, stating Iran had agreed not to possess nuclear weapons but adding "they might change their minds."
As oil prices climbed, US Treasury yields also moved higher, with the 10-year yield approaching 4.5% and the 30-year yield nearing 5%. This move also followed a strong ADP employment report.
Shares of US private equity firms acted as a drag on the market after Swiss private equity firm Partners Group announced limits on investor redemptions for one of its funds. KKR fell 6%, and Blackstone Group declined 5%.
In contrast, shares of Broadcom Inc. moved higher ahead of its earnings report.
The major indices had hit record highs on Tuesday. The broad S&P 500 rose 0.13%, closing above 7,600 for the first time. The Dow gained 228.91 points, or 0.45%, and the Nasdaq Composite edged up 0.03%.
Megan Shu, Chief Investment Strategist at Wilmington Trust, noted that if the S&P 500 closes higher this week, it would mark its tenth consecutive weekly gain, the longest such streak since 1985. She suggested the market might take a breather as summer begins.
"The market momentum is very strong, and there are many good reasons for that, including a lot of optimism and strong demand for the AI investment cycle. But we are entering a phase following the recent earnings season—which was an extremely positive catalyst for the market," she said. "Now we are facing the summer lull. Trading activity may slow down, and there are still many geopolitical risks ahead."
"I'm not necessarily predicting a sharp reversal in the market, but I think it's very reasonable for the market to pause here, even see a slight pullback, and introduce more volatility during the summer months," Shu added.
On the economic data front Wednesday, the US May ADP report indicated private sector employment rose by 122,000, surpassing forecasts.
The ADP report stated businesses added 122,000 jobs in May, up from 105,000 in April and better than the Dow Jones consensus estimate of 110,000.
Unlike previous months where job growth was concentrated in a few sectors like healthcare, the gains this time were more broad-based.
Education and health services led again, adding 57,000 jobs. Trade, transportation, and utilities increased by 36,000. Professional and business services contributed 11,000, while construction and leisure and hospitality each added 8,000.
The ADP report on Wednesday showed a solid pace of private-sector hiring in May, further indicating labor market stability.
The payroll processor said businesses added 122,000 jobs in May, up from a revised 105,000 in April and exceeding the Dow Jones estimate of 110,000. May marked the strongest month for job growth since January 2025. The April figure was revised down by 4,000.
In contrast to earlier months where gains were concentrated, the growth was more widespread. Eight of the ten industries tracked by ADP showed increases, and hiring was evenly distributed by company size and region.
Education and health services again led with 57,000 new jobs. Trade, transportation, and utilities added 36,000. Professional and business services contributed 11,000, while construction and leisure and hospitality each added 8,000.
The information services sector shed 9,000 jobs, potentially an impact from AI growth, and natural resources and mining also reported a loss of 3,000 jobs.
Nela Richardson, Chief Economist at ADP, said, "Hiring in May was broader than in the past few years. The labor market continues to show persistent momentum heading into the summer hiring season."
Small businesses with fewer than 50 employees led the way, adding 67,000 jobs. Large businesses with 500 or more employees added 40,000, while medium-sized firms contributed 17,000.
Regarding wages, annual pay growth for job-stayers held steady at 4.4%, matching April's rate. Pay growth for job-changers edged down to 6.5%.
This report comes two days before the US Bureau of Labor Statistics releases the May non-farm payrolls data. Wall Street widely expects an addition of 80,000 jobs in May, following an increase of 115,000 in April, with the unemployment rate holding steady at 4.3%.
Federal Reserve officials will closely watch the employment data ahead of their policy meeting on June 16-17. Markets have almost fully priced in the central bank keeping its benchmark interest rate unchanged in the 3.5% to 3.75% range.
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