U.S. stocks closed lower on Wednesday as investors grappled with softer-than-expected inflation data and assessed the progress of trade negotiations between China and the United States.
The Dow Jones Industrial Average edged down 1.10 points to finish at 42,865.77. The S&P 500 lost 16.57 points, or 0.27%, closing at 6,022.24, while the Nasdaq Composite fell 99.11 points, or 0.50%, to end at 19,615.88.
Most sectors saw modest declines, with consumer discretionary and materials stocks leading the way, dropping 1.02% and 0.98%, respectively. Energy stocks bucked the trend, gaining 1.49% thanks to rising oil prices, while utilities inched up 0.05%.
Investors showed caution as China and the U.S. concluded trade talks in London, offering no major breakthroughs but keeping dialogue open.
Earlier in the day, markets briefly rallied after the U.S. Consumer Price Index (CPI) for May came in below expectations. Headline inflation rose just 0.1% from April, compared to forecasts of a 0.2% increase. Core CPI, which excludes food and energy prices, increased 2.8% year over year, matching April’s figures. On a monthly basis, core prices rose 0.1%, down from 0.2% the previous month.
The cooler inflation data fueled hopes that the Federal Reserve might cut interest rates later this year. According to the CME FedWatch Tool, the probability of a September rate cut rose to 57.2%, up from 53.5% the day before. In response, Treasury yields fell, with the 10-year yield slipping to 4.41%.
“Combined with the solid May jobs report, the CPI data reduce the chances of a nasty bout of stagflation,” wrote Stephen Juneau, a U.S. economist at Bank of America, in a note to clients.
However, economist Claudia Sahm urged caution. Speaking to Yahoo Finance, she said, “This report doesn’t necessarily tell us where we’re headed by the end of the year,” noting that the effects of current trade policies are still unfolding.
In corporate news, major tech stocks were mixed. Apple and Amazon each fell about 2%, while Nvidia, Alphabet, and Meta slipped around 1%. Broadcom surged 3.38%, and Microsoft and Tesla posted slight gains.
Intel dropped 6.46%, leading the decliners in the S&P 500, erasing most of its gains from the previous day. Advanced Micro Devices shares dipped 1.7% ahead of the company’s “Advancing AI” event scheduled for Thursday.
