Stocks sold off broadly on Wednesday as investors digested a hotter-than-expected inflation report and escalating tensions in the Middle East. All three major indexes closed in the red, with the Nasdaq leading losses as technology shares bore the brunt of the selling. The dual headwinds of a renewed inflation scare and fears that the US-Iran conflict could broaden proved too much for bulls to overcome, even as some corners of the market held up relatively well.
What Moved Markets
The Dow Jones Industrial Average fell 953 points, or 1.87%, to close at 49,918.78. The S&P 500 dropped 119.66 points, or 1.62%, to finish at 7,266.99. The Nasdaq Composite shed 509 points, or 1.98%, to close at 25,169.50.
The day’s primary catalyst was the May Consumer Price Index report, which showed annual inflation accelerating to 4.2% — the highest level since April 2023. A surge in energy costs drove much of the headline figure, with gasoline prices up more than 40% year-over-year as the US-Iran conflict continues to squeeze global oil supplies. The one bright spot in the report was core inflation, which strips out food and energy — that measure rose just 0.2% for the month, suggesting the energy shock has not yet spread widely into other parts of the economy. The mixed read gave markets little comfort, however, as the headline number reinforced worries that the Federal Reserve will have less room to maneuver. Adding to the anxiety, President Trump signaled that negotiations with Iran were taking “too long” and hinted at further military action, sending a shiver through risk assets in the afternoon.
Eight of eleven S&P 500 sectors finished lower. Technology fell 2.4%, Industrials dropped 3.4%, and Materials declined 2.35%. Energy was one of the few bright spots, gaining 1.49%, while Consumer Staples added 1.61% as investors sought defensive shelter.
Notable Movers
Super Micro Computer (SMCI) was the session’s biggest loser among well-known names, tumbling 12%. The server maker, which is heavily tied to AI infrastructure buildout, was caught in a broad tech selloff as investors rotated away from high-multiple growth names.
Old Dominion Freight Line (ODFL) slid nearly 5%, reflecting broader weakness in the Industrials sector. Freight and logistics names have been under pressure as concerns grow that slowing consumer demand — reinforced by the University of Michigan Consumer Sentiment reading that recently hit a record low of 44.8 — could weigh on shipping volumes.
Generac Holdings (GNRC) fell 5.2%, pulled lower alongside other industrial names despite the company’s exposure to backup power, an area that has benefited from energy volatility.
Robinhood Markets (HOOD) bucked the trend and surged 8.1%, continuing its run as retail trading activity picks up during volatile markets. Higher volatility tends to boost trading volumes on the platform, which investors appear to be pricing in.
KLA Corp. (KLAC) gained 6.7% and Applied Materials (AMAT) rose 5.5%, with both semiconductor equipment names attracting buyers who view the recent chip-sector pullback as an opportunity. While the broader tech sector struggled, these two names managed to stand out as selective buying returned to parts of the semiconductor space.
Looking Ahead
Investors will be watching for any fresh developments out of the Middle East, which has quickly become the dominant variable for both oil prices and overall market sentiment. On the economic calendar, next week brings retail sales data, which will offer a clearer picture of whether inflation and geopolitical uncertainty are starting to crimp consumer spending. Fed officials are in their pre-meeting quiet period ahead of the June policy decision, so markets will be left to interpret the data on their own. With the Nasdaq now down sharply from its 52-week high and the S&P 500 pulling back from recent highs, the key question for investors is whether this is a healthy reset or the start of something more prolonged — and the answer likely hinges on whether the Iran situation stabilizes in the weeks ahead.