US Stocks Fall After 3-Day Rally

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    In New York, the surge on Wall Street lost momentum on Wednesday as U.S. stocks retreated, pulling back from just a hair within their historical peak. The S&P 500 dipped by 0.3%, marking its first loss in four sessions. Meanwhile, the Dow Jones Industrial Average remained virtually unchanged with a mere 1-point loss, and the Nasdaq composite recorded a 0.5% drop.

    Notably, several major technology stocks saw declines, with Apple suffering a 1.9% fall, becoming the biggest drag on the market. The company has seen little excitement in the market following recent announcements of upcoming minor software upgrades for its devices.

    The bond market witnessed more significant movement as Treasury yields decreased. This came after reports indicated that President Donald Trump’s tariffs have yet to create a substantial increase in inflation. Specifically, inflation for U.S. consumers in May reflected a 2.4% rise in costs for essentials like food and gasoline compared to a year ago. Though this represented an increase from April’s 2.3% rate, it still didn’t meet Wall Street’s anticipations of a 2.5% inflation spike.

    Economists have been concerned that Trump’s broad tariffs might trigger a surge in inflation just as it appeared to be stabilizing near the Federal Reserve’s 2% target. However, current evidence suggests the full impact of the tariffs could take several more months to materialize.

    Following two days of trade discussions between the U.S. and China, financial markets showed only minor reactions. Trump announced on Wednesday that China had agreed to continue supplying rare-earth minerals and magnets to the U.S., alongside admissions of Chinese students to American universities; a detail that awaits mutual agreement between Trump and the Chinese leader. Trump further emphasized the intention to collaborate closely with President Xi Jinping to foster American trade opportunities in China, expressing optimism for gains on both sides.

    Investors remain hopeful for a broader trade agreement that could reduce tensions between the U.S. and China, the world’s two economic giants. Optimism around such treaties has been a pivotal force enabling the S&P 500 to recover almost completely from a 20% downturn it had experienced a couple of months ago. Absent these deals, analysts fear the combination of Trump’s high tariffs could edge the economy toward recession while exacerbating inflation. Presently, the S&P 500 is positioned 2% beneath its historical zenith.

    On Wall Street, Chewy plunged by 11% after revealing weaker-than-expected profits for its latest quarter. This resulted in disappointment for investors who had seen its stock rally by roughly 37% earlier in the year. Concurrently, Tesla’s shares oscillated between negatives and positives before ending with a modest 0.1% appreciation. The electric vehicle manufacturer has been trying to recover from losses it suffered after complications in CEO Elon Musk’s interactions with Trump, which spurred concerns over business implications.

    Summarizing, the S&P 500 slipped by 16.57 points settling at 6,022.24. The Dow Jones Industrial Average decreased slightly by 1.10 points to 42,865.77, and the Nasdaq composite dropped 99.11 points to finish at 19,615.88. In the bond market, the yield on the 10-year Treasury adjusted down to 4.41% from 4.47%, observed late Tuesday. Short-term yields, indicating perceptions of the Federal Reserve’s future interest rate maneuvers, dipped even further.

    The unexpectedly moderate inflation report spurred Wall Street to increase their predictions that the Fed might reduce its primary interest rates at least twice before the year concludes. Despite the Fed’s decision to uphold a steady rate this year after rate cuts in the previous year, eyes are now on how the tariffs might stoke inflation. Any further rate reductions could inadvertently encourage more inflation besides smoothing economic growth.

    Brian Jacobsen, chief economist at Annex Wealth Management, noted, “The Fed could be justified in doing some preemptive rate cuts. Previously, they feared inflation rising before growth slowed, but with current dynamics, they might need to reassess their stance.”

    In global stock markets, European indexes largely fell following a positive trajectory in Asia. Among top performers was South Korea’s Kospi, which surged by 1.2%.