Wall Street dips as investors focus on Middle East tension

New Straits Times

a day ago

Wall Street dipped on Wednesday, with investors spooked by Middle East tensions, while a tame inflation report calmed concerns around tariff-driven price pressures and traders awaited more details on China-US trade talks.
The S&P 500 erased modest gains after a US source said the US embassy in Iraq was preparing for evacuation due to heightened security risks in the region. A senior Iranian official said earlier that Tehran will strike US bases in the region if nuclear negotiations fail and conflict arises with the United States.
Data showed consumer prices increased only marginally in May, while economists expect inflation to accelerate in the coming months due to the Trump administration's import tariffs.
Annually, headline inflation stood at 2.4 per cent, lower than the 2.5 per cent rise estimated by economists polled by Reuters.
"There's still concern about Trump's tariffs being inflationary but this report was better than expected and it fuels hope that the Federal Reserve will be able to step in with rate cuts later on this year," said Robert Pavlik, senior portfolio manager at Dakota Wealth.
Traders project a 70 per cent chance that the Federal Reserve will cut interest rates by its September policy meeting, according to the CME Group's FedWatch tool.
A day after officials from Washington and Beijing agreed on a framework to put their tariff truce back on track, President Donald Trump said the US deal with China was done, with Beijing to supply magnets and rare earth minerals.
With investors betting the United States will reach trade agreements that reduce Trump's steep trade barriers, the S&P 500 is now trading just below its February record high.
"The worst-case scenario is probably behind us. There's a little bit of face-saving for both sides," said John Praveen, managing director at Paleo Leon in Princeton, New Jersey. "They got an agreement. The question is whether it will be implemented."
According to a White House official, the agreement with China allows the US to charge a 55 per cent tariff on imported Chinese goods, including a 10 per cent baseline "reciprocal" tariff, a 20 per cent tariff for fentanyl trafficking and a 25 per cent tariff reflecting pre-existing tariffs. China will charge a 10 per cent tariff on US imports, the official said.
The US stock market has rallied in recent weeks, recovering from a slump in April sparked by Trump's "Liberation Day" tariffs.
The S&P 500 was down 0.34 per cent at 6,018.27 points.
The Nasdaq declined 0.56 per cent to 19,605.32 points, while the Dow Jones Industrial Average was down 0.02 per cent at 42,857.30 points.
Of the 11 S&P 500 sector indexes, eight declined, led lower by consumer discretionary, down 1.06 per cent, followed by a 0.94 per cent loss in materials.
"Stable inflation, range-bound interest rates and rising earnings provide valuation support and - in our view - a basis for stocks to trend higher," said Terry Sandven, chief equity strategist at US Bank Wealth Management.
Nine of the 11 major S&P 500 sub-sectors rose, led by a 0.4 per cent gain in information technology shares.
Tesla was up 0.5 per cent after CEO Elon Musk said he regretted some of the negative social media posts he made last week about Trump as they had gone "too far".
Software development platform provider GitLab lost 6 per cent after its quarterly results disappointed investors.
Shares of videogame retailer GameStop fell 3.9 per cent after it reported a decline in first-quarter revenue.
Declining stocks outnumbered rising ones within the S&P 500 by a 1.9-to-one ratio.
The S&P 500 posted 10 new highs and 2 new lows; the Nasdaq recorded 77 new highs and 34 new lows.