US stock markets continued to decline during Wednesday's morning session, with the Dow Jones Industrial Average shedding 200 points. Semiconductor stocks extended their recent slide. Crude oil prices moved higher after former US President Donald Trump suggested Iran negotiations were taking "too long" and threatened further action. The US Consumer Price Index for May rose 4.2% year-over-year, hitting a three-year high.
The Dow Jones fell 202.46 points, or 0.40%, to 50,669.65. The S&P 500 index dropped 20.52 points, or 0.28%, to 7,366.13. The Nasdaq Composite declined 108.227 points, or 0.42%, to 25,570.595.
In a social media post on Wednesday, the former president stated that Iran "took too long to negotiate a deal that should have been very good for them, now they must pay!!!"
He posted on Truth Social: "Iran's military is a total and complete mess, most of their forces, like their Navy and Air Force, don't even exist anymore - they have been totally defeated. Iran is all talk and no action."
Oil prices edged 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 on Tuesday evening. US Central Command stated that US forces conducted strikes against Iran "in response to the downing of a US Army Apache helicopter yesterday." The former president had previously accused Iran of shooting down the helicopter, which was reportedly patrolling over the Strait of Hormuz.
Semiconductor stocks continued their recent downtrend. Shares of Micron Technology, Advanced Micro Devices, and Broadcom traded lower in morning action. The chip sector has declined in four of the past five trading sessions.
The iShares Semiconductor ETF continued to fall on Wednesday after turning lower on Tuesday. The sector has been under significant pressure recently, with the ETF ultimately falling 10% last Friday. The group saw a modest rebound on Monday before selling pressure resumed.
Chip stocks are facing pressure ahead of SpaceX's initial public offering on Friday. Some traders believe investors, particularly retail investors, are reducing holdings in some popular winning chip stocks to make room for what could be the largest IPO ever in their portfolios. Others view the weakness simply as profit-taking following a rapid price advance. The chip ETF is still up more than 86% year-to-date.
In Tuesday's regular session, chip stocks dragged the S&P 500 down 0.26% and the Nasdaq Composite down 0.97%. The blue-chip Dow Jones index gained 86.10 points, or 0.17%.
Tuesday's decline extended a pullback from last week, following a prior rally driven by artificial intelligence optimism.
Marta Norton, Chief Investment Strategist at Empower Investments, commented: "If we look at the substance of the market over the past few weeks, it has indeed been concentrated in the memory and semiconductor sectors that were driving the market higher. It has been the real driver behind all of this, and it has moved so fast that it feels very toppy at the moment."
"So, does that mean there is some fundamental deterioration?" she added. "I'm not so sure, but clearly sentiment seems to have become excessive, and we are experiencing some sort of pullback."
On the economic data front Wednesday, the Consumer Price Index for May rose 0.5% from the previous month, matching expectations. The forecast range from 68 analysts was between a 0.4% and 0.7% increase.
Excluding food and energy, CPI rose 0.2% from the prior month; the estimate was 0.3%. CPI increased 4.2% from a year ago, in line with forecasts.
According to the US 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 in May. Real average hourly earnings declined 0.7% from a year ago. Real average hourly earnings fell 0.1% from the prior month. Real average weekly earnings decreased by $1.55 from a year ago to $385.44.
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