Wall Street experienced a pause in its recent rally on Wednesday, as U.S. stocks retreated after coming close to their all-time highs. The S&P 500 dropped 0.3%, marking its first loss in four days, while the Dow Jones Industrial Average remained nearly unchanged with a minor decline of just 1 point. The Nasdaq composite fell by 0.5%, affected heavily by significant losses in several major technology stocks.
A notable contributor to this downturn was Apple, which saw its shares decline by 1.9%. Apple’s stock has shown little movement this week, particularly following the announcement of several incremental updates to its software.
In the bond market, Treasury yields saw a decrease, driven by a report indicating that President Trump’s tariffs had not yet significantly influenced inflation levels. U.S. consumers experienced an increase in prices—2.4% higher for food, gasoline, and other living expenses compared to the same month last year, a slight uptick from April’s 2.3% inflation rate. However, it was less severe than the 2.5% forecasted by Wall Street analysts.
Despite ongoing concerns that these tariffs could eventually lead to higher inflation, experts like Ellen Zentner from Morgan Stanley Wealth Management point out that the immediate effects have yet to surface.
Moreover, the conclusion of trade talks between the U.S. and China brought mixed reactions from financial markets. Trump announced that a deal had been made for China to supply rare-earth minerals and magnets while allowing Chinese students to study in U.S. universities. Both leaders are expected to collaborate on boosting trade ties, which investors hope could eventually lead to a broader agreement that may ease trade tensions.
The optimism surrounding potential trade deals has been pivotal in propelling the S&P 500 nearly back to its all-time highs after a previous drop of around 20%. However, without substantial agreements, there are fears that Trump’s tariffs could hinder the economy and spur inflation, threatening a potential recession.
In individual stock movements, Chewy saw a significant decline of 11% after reporting disappointing profits, while Tesla’s stock fluctuated between gains and losses, ultimately closing with a slight gain of 0.1%. Tesla has been attempting to recover from recent declines following controversial comments made by CEO Elon Musk concerning his relationship with Trump.
Investors are receiving some encouragement from a better-than-expected inflation report, which has raised expectations that the Federal Reserve could cut interest rates at least twice by the end of the year. The Fed has maintained steady rates this year, awaiting clear impacts from tariffs before making any moves.
In global markets, indices mostly declined across Europe after earlier gains in Asia, with South Korea’s Kospi standing out with a rise of 1.2%.
The current market dynamics illustrate the delicate balance between trade developments and their impact on inflation and economic growth, presenting both challenges and opportunities for investors.