The S&P 500 closed lower on Wednesday, ending a three-day winning streak. Traders weighed a preliminary U.S.-China trade agreement and new inflation data. The S&P 500 lost 0.27% to end the day at 6,022.24.
The Nasdaq Composite fell 0.5% to 19,615.88, while the Dow Jones Industrial Average shed 1.1 points, closing at 42,865.77. In May, the Consumer Price Index (CPI) increased 0.1% from April, less than the 0.2% estimate from economists polled by Dow Jones. Core CPI, which strips out volatile food and energy prices, also increased 0.1%, less than expected.
Alexandra Wilson-Elizondo, global co-CIO of Multi-Asset Solutions at Goldman Sachs Asset Management, said, “Inflation in May was lower than anticipated, suggesting the tariffs aren’t having a large immediate impact because companies have been using existing inventories or slowly adjusting prices due to uncertain demand.”
“As we wait for the 90-day tariff pause to pass, the market will be caught between inflation and job prints. If inflation stays under control or the job market weakens, the Federal Reserve will likely consider cutting interest rates down the road,” Wilson-Elizondo added. Discussions between U.S. and Chinese officials have been a key focus this week for investors who remain on edge regarding trade policy.
Officials reached a preliminary agreement in London, but will seek approval on the framework from the U.S. and Chinese presidents before implementing it.
Market downturn amid trade talks
As part of the framework, China would approve the exports of rare earth minerals while the U.S. would roll back restrictions on the sale of advanced technology to China.
Commerce Secretary Howard Lutnick confirmed that U.S. tariffs on Chinese imports will remain at their current levels for now. President Donald Trump noted that the deal with China is “done, subject to final approval with President Xi and me.”
U.S. crude oil futures rose more than 4% on Wednesday afternoon on news of escalating tensions in the Middle East. Crude futures rose $2.90, or 4.34%, to close at $69.77 per barrel.
The U.S. is preparing a partial evacuation of its embassy in Iraq due to heightened security risks in the region. The U.S. military has authorized the “voluntary departure” of troops’ dependents from the Middle East due to rising tensions with Iran. The widely followed $39 billion 10-year Treasury auction provided some relief to investors who have been worried about global demand for government assets.
The yield of 4.221% came in 7 basis points below the level when issued, indicating healthy demand. Major indexes ended lower as investors digested trade developments and fresh inflation data. While the market took a breather from its recent gains, underlying factors such as trade talks and inflation trends continue to shape investor sentiment.
