US stocks experienced a slight decline in early trading on Wednesday evening, Beijing time. Federal Reserve Chair Kevin Warsh offered no hints regarding the July interest rate decision but stated inflation remains "too high." The market continues to monitor developments in US-Iran relations. US ADP private sector employment increased by 98,000 in June, falling short of expectations.
The Dow Jones Industrial Average fell 41.80 points, or 0.08%, to 52,277.40. The Nasdaq Composite dropped 136.19 points, or 0.52%, to 26,077.53. The S&P 500 index declined 17.85 points, or 0.24%, to 7,481.51.
Stocks closed higher on Tuesday, capping a strong first half of 2026. In the first six months of the year, the Dow gained 8.9%, marking its best first-half performance since 2021. The broader S&P 500 rose 9.6%, while the Nasdaq Composite advanced 12.8%. The small-cap Russell 2000 index surged nearly 22%, achieving its best first-half result since 1991.
A surge in chip and artificial intelligence-related stocks has been propelling the market, with part of Tuesday's gains attributed to strength in semiconductor shares. In fact, during the second quarter of 2026, a record-breaking rally in chip stocks added a combined $2 trillion in market value to Micron Technology, Intel Corp, and Advanced Micro Devices.
Looking ahead to the second half of the year, Paul Hickey, co-founder of Bespoke Investment Group, expressed continued optimism for the sector but suggested its momentum may be overheated.
"Long term, we're still bullish on semis, but I wouldn't be aggressively buying here. This is an AI-driven bull market, that is the theme. If this bull market is going to continue, it's going to be led by tech, and probably semis, but they don't have to outperform all the time, you can't keep up that pace forever," he said during a media appearance Tuesday afternoon. "So I think in that regard, they're a little bit... stretched. So I would probably suggest a little bit of a breather here."
Federal Reserve Chair Kevin Warsh spoke Wednesday at the European Central Bank's Central Banking Forum in Sintra, Portugal. Warsh provided no indication about the July rate decision but characterized inflation as "too high."
He offered no signals regarding potential policy actions the central bank might take later this month but noted that price levels remain elevated.
"We all work on price stability, it may not be our only mandate, but if there was one common feeling I had over the last few days, it's an openness on AI-related issues, an openness on productivity, but we all look around and see that prices are too high," Warsh said during a panel discussion in Sintra.
Joining Warsh on the panel were European Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey, and Bank of Canada Governor Tiff Macklem.
Aside from a post-meeting press conference two weeks prior, this was Warsh's first public remarks since his confirmation in May. The Federal Reserve has held interest rates steady this year as policymakers weigh persistent inflation and other economic factors.
The market continues to focus on the latest developments in US-Iran relations. Oil prices edged lower Wednesday after Iran stated it would not meet with US representatives in Qatar, heightening market concerns about the peace process.
According to media reports, Iranian officials indicated that Tehran and Washington still need to negotiate terms of the interim peace agreement signed last month before addressing more complex issues.
Jared Kushner, son-in-law of former US President Donald Trump, and US envoy Steve Witkoff arrived in Doha on Tuesday, though a Qatari government spokesperson stated they were meeting with mediators, not directly with Iranian counterparts.
The US and Iran reached a 14-point memorandum of understanding on June 17 to pause conflicts that had disrupted global oil shipments through the strategic Strait of Hormuz.
Located in the Persian Gulf between Oman and Iran, the Strait of Hormuz is one of the world's most critical energy transit chokepoints. The narrow waterway typically handles about 20% of global oil shipments.
ING strategists Warren Patterson and Ewa Manthey noted that despite recent US-Iran tensions, the oil market remains optimistic about restored Middle Eastern supply.
In a research note issued Wednesday, they pointed out that tanker traffic through the strategic Strait of Hormuz still appears constrained. "Admittedly, there has been a marginal increase in inbound tanker traffic, suggesting growing confidence among shipowners in sailing vessels into the Persian Gulf," Patterson and Manthey said. "If that trend accelerates, it would be a clear headwind – and could directly challenge our view that oil prices should rise from current levels," they added.
On the economic data front, a report from ADP on Wednesday showed private sector employment growth, adjusted for seasonal variations, was 98,000 in June. This was down from an unrevised 122,000 in May and slightly below the Dow Jones consensus estimate of 110,000.
Nearly half of June's job gains – 48,000 – came from the education and health services sector, which has been a consistent leader in employment growth. All but 2,000 of the new jobs were in service-providing industries.
Other sectors showing gains included trade, transportation and utilities (15,000), financial activities (14,000), and other services (8,000). Natural resources and mining shed 5,000 positions, the only sector to contract. Leisure and hospitality added a mere 2,000 jobs, continuing the sector's weak trend this year, which is viewed as a gauge of underlying consumer demand.
"The pace of hiring tells a story of supply and demand worth watching," said Nela Richardson, chief economist at ADP. "We know job seekers are taking longer to find work, but there are also signs of tight labor supply in certain sectors. For now, the overall effect is slower job growth."
Annual pay gains for job-stayers held steady at 4.4%, while pay growth for job-changers ticked up to 6.6%.
Job growth was tilted toward smaller firms. Businesses with fewer than 50 employees added 53,000 workers, while companies with 500 or more employees added 25,000. Midsized firms added 29,000.
The ADP report serves as a precursor to the more closely watched nonfarm payrolls data from the Bureau of Labor Statistics due Thursday. In recent months, ADP figures have generally been lower than the official government reports, which have shown overall robust employment growth this year.
Consensus expectations are for nonfarm payrolls to increase by 115,000 in June, with the unemployment rate holding steady at 4.3%. Average hourly earnings are forecast to rise 0.3% month-over-month and 3.5% year-over-year.
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