US equity markets commenced Wednesday's session in negative territory, with semiconductor stocks extending their recent decline. Crude oil prices edged higher following remarks from former US President Donald Trump suggesting Iran had taken "too long" to negotiate and threatening further action. The US Consumer Price Index for May rose 0.5% month-over-month, matching expectations.
The Dow Jones Industrial Average fell 249.08 points, or 0.49%, to 50,623.03. The Nasdaq Composite dropped 175.34 points, or 0.68%, to 25,503.48. The S&P 500 index declined 33.68 points, or 0.46%, to 7,352.97.
Early Wednesday, former President Trump stated on social media that Iran "took too long to negotiate a deal that should have been extremely good for them, and now they must pay!!!" He added on Truth Social that Iran's military was a "complete and total mess" and that the country "talks but doesn't do."
Oil prices moved slightly higher following these comments. West Texas Intermediate crude futures were last up approximately 2%, trading around $90 per barrel.
Tensions in the Middle East escalated again Tuesday night. US Central Command stated that US forces had struck targets in Iran "in response to the downing of a US Army Apache helicopter yesterday." Trump had previously accused Iran of shooting down the helicopter, which was patrolling over the Strait of Hormuz.
Semiconductor shares continued their recent slide. Shares of Micron Technology, Advanced Micro Devices, and Broadcom traded lower in early action. The chip sector has declined in four of the past five trading sessions.
The iShares Semiconductor ETF fell again Wednesday after turning lower on Tuesday. The sector has been hit hard recently, with the ETF ultimately falling 10% last Friday. A minor rebound on Monday was followed by renewed selling pressure.
Chip stocks are under pressure ahead of SpaceX's anticipated initial public offering this Friday. Some traders suggest investors, particularly retail traders, are lightening positions in some popular winning chip stocks to make room for what could be the largest IPO ever in their portfolios. Others view the weakness as profit-taking following a rapid price advance. The chip ETF remains up more than 86% year-to-date.
During Tuesday's regular session, chip stocks weighed on the broader market, contributing to a 0.26% decline for the S&P 500 and a 0.97% drop for the Nasdaq Composite. The blue-chip Dow Jones Industrial Average gained 86.10 points, or 0.17%.
Tuesday's decline extended a pullback that began last week, following a market rally driven by artificial intelligence optimism.
Marta Norton, Chief Investment Strategist at Empower Investments, commented, "If the market substance we've seen over the past few weeks has indeed been concentrated in the memory and semiconductor sectors driving the market higher. It has been the real driver behind all of this, and it has run up so fast, it feels very toppy right now."
"So, does that mean there is some fundamental deterioration?" she added. "I'm not so sure, but clearly the sentiment seems to have gotten ahead of itself, and we are experiencing some sort of pullback."
On the economic data front Wednesday, the US Bureau of Labor Statistics reported the Consumer Price Index rose 0.5% in May compared to the previous month, aligning with forecasts. The range of estimates from 68 analysts was between 0.4% and 0.7%.
Excluding food and energy, the CPI increased 0.2% from the prior month, compared to a forecast of 0.3%. The CPI rose 4.2% compared to the same month last year, matching expectations.
According to the Bureau of Labor Statistics, real average weekly earnings in the US fell 0.4% year-over-year in May. Real average weekly earnings decreased 0.2% month-over-month. Real average hourly earnings declined 0.7% year-over-year. Real average hourly earnings fell 0.1% month-over-month. Real average weekly earnings dropped by $1.55 compared to the previous year, to $385.44.
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