U.S. stock markets closed lower on Wednesday, with the S&P 500 index posting a slight decline. Rising oil prices put pressure on equities as investors focused on another busy day of corporate earnings reports.
The Dow Jones Industrial Average fell 6.06 points, or 0.01%, to close at 52,218.58. The Nasdaq Composite dropped 146.30 points, or 0.57%, to 25,690.90. The S&P 500 declined 10.24 points, or 0.14%, finishing at 7,498.96.
Brent crude futures rose 3% on Wednesday, trading above $94 per barrel to reach their highest level in over a month and briefly surpassing $95. West Texas Intermediate crude futures also gained approximately 3%, breaking above $86 per barrel.
The move higher in oil prices came as the U.S. conducted its 11th consecutive strike against Iran, following comments from a U.S. official that Iran was "not serious about negotiations."
The official stated that the U.S. would be serious if Iran was serious, but would take necessary measures to protect its interests and those of its allies if not. The official added that U.S. forces would continue to protect shipping through the Strait of Hormuz.
Traders are closely monitoring oil prices, concerned that they could keep consumer goods prices elevated—a factor that could prompt the Federal Reserve to raise interest rates.
An investment manager noted that inflation remains high and there is little the Fed can do about it. A key factor currently affecting the market is uncertainty about the future path of interest rates.
As of Wednesday afternoon, traders in federal funds futures markets priced in a 31% chance of a Fed rate hike this month, up from 10% a week ago. Data also indicated a 75% probability of at least a 25-basis-point hike by September.
Earnings Remain in Focus
Corporate earnings reports were again a central focus on Wednesday, with companies including ServiceNow, International Business Machines, Tesla, Texas Instruments, and Alphabet scheduled to release results. Investors are paying close attention to updates on AI spending, cloud demand, corporate technology budgets, and the outlook for the second half of the year.
As the earnings season progresses, investors continue to assess whether strong demand for AI infrastructure and software can continue to support the overall high valuations in the technology sector.
The investment manager emphasized that everything hinges on order flow. Beating earnings expectations and raising guidance are important, but what ultimately drives the market are expectations for how long the cycle can last and the growth anticipated one, two, or three years out, rather than just next quarter's or this year's profits. He added that everyone will be watching the mega-cap tech companies.
Shares of Super Micro Computer surged 21% after the server maker forecast fourth-quarter profit margins above expectations and reported new orders exceeding $60 billion for the quarter.
Shares of AT&T also rose, gaining 2% after the telecommunications company reported better-than-expected second-quarter results. Conversely, shares of GE Vernova fell 8% after its second-quarter profit missed expectations.
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