Wall Street indices opened significantly lower on Wednesday, with the Dow Jones Industrial Average falling more than 250 points, or about 0.5% in early trading. The S&P 500 and Nasdaq Composite also slipped around 0.5% and 0.6% respectively, as risk sentiment weakened across Wall Street. This marks a continuation of the previous session's decline when the S&P 500 dropped 0.06% and the Nasdaq fell 1.1 points, as investors now face renewed uncertainty over geopolitical developments and technology sector weakness.
The latest market decline comes as President Trump has said that he is "close to ordering strikes on Iran" and accused Iran of taking too long to negotiate, stating it will have to "pay the price." According to CNBC TV18, these latest comments have significantly escalated market concerns about potential military action in the region. The comments followed overnight military exchanges between the two countries, including US strikes on Iranian targets after the reported downing of a US Army Apache helicopter near the Strait of Hormuz. The renewed aggressions between America and Iran are weighing heavily on investor sentiment, creating headwinds for risk assets and contributing to the broader selloff in technology stocks.
Technology stocks, particularly semiconductor names, remained under significant pressure with shares of Micron Technology, Advanced Micro Devices and Broadcom declining in early trade, extending recent losses in the sector. The iShares Semiconductor ETF also fell about 1%, adding to a sharp pullback that has weighed on AI-linked stocks in recent sessions. This represents a significant shift from Monday's recovery when semiconductor companies spearheaded the market recovery, with Micron Technology surging more than 9% after falling 13% during Friday's selloff.
The market decline is compounded by inflation reaching a three-year high, with the Consumer Price Index rising 4.2% from a year earlier in May, marking the highest inflation rate since early 2023, according to the latest US Bureau of Labor Statistics data. However, core inflation, which excludes food and energy prices, increased 0.2% from the previous month, slightly below economists' expectations, offering some relief amid concerns about persistent price pressures. This development has fueled the possibility of a Federal Reserve rate hike, with markets now pricing roughly a 70% chance of a Fed rate hike by December. The stronger-than-expected labor market data from last week had already raised concerns that the Federal Reserve could maintain a restrictive policy stance for longer than previously expected.
Oil prices moved higher on the developments, with West Texas Intermediate crude futures rising more than 1% to around $89 a barrel, as reported by CNBC TV18. The higher oil prices have fueled concerns that energy-driven inflation could remain elevated, prompting investors to scale back expectations for Fed rate cuts and pushing Treasury yields and the U.S. dollar higher, reducing the appeal of non-yielding assets such as gold. The metal has struggled during much of the Gulf conflict despite its reputation as a safe-haven asset, as the war's impact on crude oil markets has created an unusual dynamic for bullion.
