Major U.S. stock markets experienced significant losses Wednesday afternoon, with all three primary indexes dropping more than 1% as technology stocks continued their downward trend and escalating Middle East tensions heightened investor concerns.
President Donald Trump stated the U.S. would strike Iran again “very hard” after one of the most substantial overnight exchanges of gunfire since an April ceasefire in the Middle East conflict.
Semiconductor stocks were particularly battered, with their index declining 2.6%. Companies like Nvidia and Broadcom were among the heaviest weights pulling down the S&P 500, while the technology sector index for the S&P 500 dropped 1.1%. Market participants have grown increasingly concerned about inflated stock prices in the technology space.
Market volatility continued building on Tuesday’s gains, with the Cboe Volatility Index showing increased uncertainty in recent trading sessions.
Tom Hainlin, an investment strategist at U.S. Bank Wealth Management in Minneapolis, noted that investors continue taking profits from technology investments.
Additionally, market participants are now “pricing in maybe a higher interest rate” following recent economic reports while also expressing concern about the ongoing conflict, he explained.
“Perhaps that conflict continues on into the mid to late summer,” he stated.
The Federal Reserve is anticipated to maintain current interest rates at its June policy meeting. Market participants are factoring in at least one 25-basis-point rate increase before year-end.
The Dow Jones Industrial Average dropped 721.32 points, or 1.42%, closing at 50,150.79. The S&P 500 declined 87.78 points, or 1.19%, finishing at 7,298.87. The Nasdaq Composite fell 382.36 points, or 1.49%, ending at 25,296.35.
Friday’s employment report exceeded expectations. Wednesday’s data revealed U.S. consumer prices rose 4.2% over the 12 months ending in May, marking the steepest increase since April 2023, as Middle East hostilities drove up gasoline and energy costs.
However, this inflation rate matched economist predictions according to a Reuters survey.
Super Micro Computer shares plummeted 20.9% after revealing plans to generate $7 billion through various equity and equity-related financing deals to purchase components for expanding AI server demand.
The shift away from heavily favored technology stocks has benefited other market sectors that have underperformed this year, including healthcare, real estate and consumer staples.
The highly anticipated $1.75 trillion SpaceX public offering scheduled for Friday, seeking a record $75 billion in funding, could further pressure U.S. markets as worries grow about excessive technology sector enthusiasm.
Transportation company stocks including XPO, J.B. Hunt and Old Dominion also declined after Amazon revealed plans to expand its less-than-truckload shipping services across the U.S. Industrial stocks led sector declines.
Falling stocks outnumbered rising ones by a 1.41-to-1 margin on the NYSE. The exchange recorded 168 new highs and 103 new lows. On the Nasdaq, 2,038 stocks gained while 2,729 declined, with falling issues leading advancing ones by a 1.34-to-1 ratio.
