Wall Street pulled back on Tuesday as a hotter-than-expected inflation report and renewed concerns over the U.S.-Iran conflict sent investors into risk-off mode. The sell-off was sharpest in technology and semiconductor stocks, which had surged to record highs in recent sessions. While a late-afternoon recovery trimmed the worst of the damage, all three major indexes finished the day in the red or barely above the flatline.
What Moved Markets
The S&P 500 (SPI:SP500) closed at 7,400.96, falling 11.88 points or 0.16% after notching a record high the day before. The Dow Jones Industrial Average eked out a fractional gain, finishing at 49,760.56, up 56.09 points or 0.11%, as its heavier weighting in energy and industrial names cushioned the blow. The Nasdaq Composite bore the brunt of the selling, dropping roughly 1% as chip stocks suffered their worst session in seven months. The PHLX Semiconductor Index fell about 5% on the day.
The main catalyst was April’s Consumer Price Index report. Headline CPI rose 0.6% month-over-month, putting the annual rate at 3.8% — the highest reading since May 2023 and above the 3.7% economists had expected. Core CPI, which strips out food and energy, climbed 0.4% on the month and 2.8% year-over-year, also topping forecasts. Energy prices were the primary culprit, with gasoline up 28.4% year-over-year as the near-closure of the Strait of Hormuz continues to choke global oil supplies.
Speaking of oil, crude prices surged again. West Texas Intermediate rose 3.3% to above $101 a barrel and Brent crude climbed 3.3% to over $107. President Trump told reporters the U.S.-Iran ceasefire is on “massive life support” after rejecting Tehran’s counterproposal, which demanded a lifting of the naval blockade and sanctions relief. National gas prices averaged $4.50 per gallon on Tuesday, and the U.S. government released another 53.3 million barrels from the Strategic Petroleum Reserve to try to ease the pressure.
Notable Movers
Qualcomm (QCOM) plunged 12%, its worst single-day drop since 2020, as the broad chip sell-off hammered the stock. Intel (INTC) fell 9% on heavy profit-taking after soaring more than 430% over the past year on the back of new foundry contracts with Apple, Microsoft, and Amazon. Micron (MU) and Marvell (MRVL) also posted mid-single-digit declines.
Hims and Hers Health (HIMS) cratered 14% after the telehealth company reported a surprise first-quarter loss as it pivots toward name-brand GLP-1 weight-loss drugs and away from cheaper compounded alternatives.
On the upside, Zebra Technologies (ZBRA) soared 15% after beating earnings expectations and raising its full-year outlook. Plug Power (PLUG) jumped 11% on strong revenue growth and progress toward its profitability target. Quantum Computing (QUBT) surged 14% after posting a massive revenue increase from $39,000 a year ago to $3.69 million in the first quarter.
Looking Ahead
Investors now face an uncomfortable reality: inflation is reaccelerating just as the labor market remains strong. Markets are pricing in a 98% chance the Fed holds rates steady through June, but the odds of a rate hike by December have climbed to nearly 30%. Real wages fell year-over-year for the first time in three years, a sign that rising prices are starting to bite. President Trump’s trip to Beijing for a summit with President Xi Jinping — with AI, trade, and the Strait of Hormuz on the agenda — could provide the next major catalyst. With oil above $100, CPI running hot, and chip stocks taking a breather, the path of least resistance may be sideways until the geopolitical picture clears.