Stocks Fade After Hot Start; CPI, Trade News Drive Action

U.S. stocks ended lower on Wednesday after an early rally lost steam by midday. The S&P 500 declined 0.3%, trimming its weekly gain to 0.4%, while the Nasdaq underperformed with a 0.5% loss. The Dow Jones Industrial Average finished flat, managing to hold on to a 0.2% gain since last Friday.

The session began on a strong note, lifted by a cooler-than-expected May CPI report. Headline inflation rose just 0.1%, below the forecast of 0.2%, and Core CPI matched that slowdown with a 0.1% increase versus the expected 0.3%. However, annual inflation readings told a more nuanced story: the year-over-year CPI rate edged up to 2.4% from 2.3% in April, while Core CPI held steady at 2.8% for the third straight month. The initial relief rally gave way as traders shifted focus back to geopolitical and policy uncertainties.

U.S.–China trade talks failed to produce any new agreements. Officials merely agreed to implement terms already settled in mid-May. Sentiment took another hit after Commerce Secretary Lutnick confirmed that the current 55% tariff rate on Chinese imports would remain unchanged. Meanwhile, the U.S. Court of Appeals upheld President Trump’s existing tariffs ahead of a broader hearing set for this summer. Reports also suggested progress on several other trade fronts: a potential U.S.–India interim deal could be announced by the end of the month, an agreement with the EU may materialize after the July 9 deadline, and deals with Mexico and Canada are in development, focusing on steel and security terms, respectively.

Seven of the eleven S&P 500 sectors closed in the red, with consumer discretionary and materials suffering the largest losses, each down 1.0%. Consumer stocks were pressured by tariff uncertainty, while materials lagged on headlines that the U.S. may ease steel tariffs on Mexico. That news weighed heavily on shares of Nucor and Steel Dynamics, which dropped 6.1% and 2.8%, respectively.

Technology showed early strength but reversed course alongside broader market profit-taking. Apple declined 1.9%, underperforming for most of the day, while NVIDIA gave up early gains to finish 0.8% lower. Both stocks reflected the broader sector’s retreat from morning highs. However, quantum computing names stood out, buoyed by comments from NVIDIA CEO Jensen Huang, who said the industry is approaching an inflection point. Rigetti Computing jumped 11.4%, and Quantum Computing Inc. soared 25.4%, even as both stocks saw some late-session profit-taking.

The energy sector was the day’s standout, rising 1.5% and extending its strong run in June. Rising tensions in the Middle East, including voluntary departure clearance for nonessential U.S. Embassy staff in Baghdad, helped drive crude oil prices sharply higher. WTI crude rose $3.25, or 5.0%, to $68.21 per barrel, supported further by a bullish inventory report.

Despite the pullback, the broader market remains on watch for further catalysts, with inflation data and geopolitical developments likely to guide the next leg of direction.

Our U.S. portfolio, FTinvest 11, spent most of the morning attempting a rebound to recover yesterday’s losses, but each rally faded back to the flatline. In the afternoon, the index dipped into negative territory, but regained momentum in the final hours and managed to close the day with a 0.48% gain at 776.98.