4:05pm: Higher for longer
Stocks suffered a sharp selloff on Wednesday as investors digested hotter-than-expected inflation data and renewed geopolitical tensions in the Middle East.
The Dow Jones Industrial Average tumbled 954 points, or 1.9%, to close at 49,919, while the S&P 500 dropped 1.6% to 7,267. The tech-heavy Nasdaq Composite led the declines, sliding 2% to 25,170.
Markets came under pressure after fresh data showed annual U.S. inflation accelerated to 4.2% in May, the fastest pace in more than three years. Rising energy prices, fueled in part by escalating tensions involving Iran and broader concerns about stability in the Middle East, were a major driver of the increase.
The hotter inflation reading prompted investors to reassess expectations for Federal Reserve policy. Traders increasingly wagered that policymakers may need to keep interest rates elevated for longer than previously anticipated, with some even considering the possibility of another rate hike later this year.
3:30pm: Proactive news headlines
- Power Metallic Mines Inc (TSX-V:PNPN, FRA:IVV1, OTCQB:PNPNF) closed a C$28.2 million private placement, selling over 22.5 million shares at C$1.25 each with participation from mining investor Eric Sprott.
- Abacus Global Management (NYSE:ABX) launched LifeARC, an AI-driven platform that builds personalized lifespan models using medical, genetic, and biometric data.
- Lisata Therapeutics Inc (NASDAQ:LSTA, FRA:8NE) agreed to be acquired by Kuva Labs in a deal offering $4 per share in cash plus up to $3 per share in milestone-based contingent value rights.
- Varon Corp (OTCID:OZSC) announced that its U.S. subsidiary will distribute Ballislife Drink to about 160 Southern California retail locations starting in June 2026.
- Thistle Resources (TSX-V:TRCG, OTC:TRCGF) reported high-grade gold intercepts at its Middle River Gold Project, including 1.65 g/t over 20.71 metres.
- Snail Inc (NASDAQ:SNAL) expanded its game Bellwright to PlayStation and Xbox, bringing its million-selling survival RPG beyond Steam to console audiences.
- Sonoro Gold Corp (TSX-V:SGO, OTCQB:SMOFF, FRA:23SP) closed an oversubscribed C$15.5 million private placement to fund development of its Cerro Caliche gold project in Mexico.
2:30pm: Market movers
- Shares of Fermi Inc (NASDAQ:FRMI, LSE:FRMI) surged after reports that OpenAI is among parties evaluating capacity at its Project Matador AI power campus, raising the prospect of a major commercial deal.
- Power Metallic Mines Inc (TSX-V:PNPN, FRA:IVV1, OTCQB:PNPNF) completed a C$28.2 million best-efforts private placement led in part by mining investor Eric Sprott, issuing over 22.5 million shares at C$1.25 each.
- Super Micro Computer Inc (NASDAQ:SMCI) fell sharply after announcing $7 billion in equity and linked financings to support AI server production despite reporting roughly $39 billion in recent AI-related orders.
- Abacus Global Management (NYSE:ABX) introduced LifeARC, an AI-powered longevity platform that uses medical and biometric data to generate personalized lifespan models.
- Lisata Therapeutics Inc (NASDAQ:LSTA, FRA:8NE) agreed to be acquired by Kuva Labs for $4 per share in cash plus a contingent value right of up to $3 tied to drug development milestones.
- Ceres Power Holdings PLC (LSE:CWR, OTC:CPWHF) raised nearly £103 million through a discounted share placement and retail offer, issuing 18 million new shares to support its hydrogen and fuel cell technology development.
12:30pm: Sentiment not helped by CPI
Tuesday’s market volatility has left investors uneasy, and the latest inflation data has done little to improve sentiment, according to Chris Beauchamp, Chief Market Analyst at online trading and investing platform IG.
“The selling might have slowed after Tuesday's rout but investors remain skittish despite being thrown a lifeline by the inflation figures," Beauchamp commented.
"Confidence in the strength of the rally has been shaken by Tuesday's reversal, and it is now a case of 'once bitten, twice shy' - no one wants to go charging in to buy the dip yet, which suggests more of a drift lower for the time being, though leaving the overall trend intact.”
11:25pm: Inflation still stubborn in labor-intensive services
While the May CPI report was largely in line with expectations, one area where inflation is still proving stubborn is in labor-intensive services, where prices continue to climb, noted Bill Adams, chief US economist at Fifth Third commercial Bank.
This includes services such as gardening and lawn care, home healthcare, nursing homes and adult day programs, as well as daycare and preschool.
"The industries providing these services are feeling outsize effects from tighter immigration policies," Adams commented. "These prices will likely keep rising faster than other costs in household budgets.
"The Fed will still be uneasy about inflation since it has been over target for half a decade, and since labor intensive service prices continue to put upward pressure on core inflation," Adams added.
10am: Dow leads losses at open
US stocks have opened only slightly lower, with a mix of sectors taking the hit after the hotter inflation reading.
The Dow Jones has started with a drop of 185 points or almost 0.4%, while the Nasdaq is 0.2% lower and the S&P 500 is down just over 0.1%.
Biggest fallers on the Dow are 3M, Honeywell and Caterpillar, with risers led by Coca-Cola, Chevron and Verizon.
Bottom of the S&P are Super Micro Computer, down almost 14%, with Broadcom down 6% and Old Dominion Freight next.
9.10am: Implications for Fed from CPI
Thoughts on the CPI from Chris Zaccarelli, chief investment officer for Northlight Asset Management.
"Most of this morning’s data came in line with expectations, but we are seeing a strong rise in core inflation."
With CPI at 4.2%, the Fed "will be in no position to cut rates if this continues" and, something the market has started to react to this possibility, "the Fed’s next move may need to be a hike".
Zaccarelli says the market "has been climbing a wall of worry and has been able to rally on stronger earnings and stable interest rates, but a rising rate environment is another thing altogether."
He counters that if things wrap up in the Middle East and shipping gets back to normal over the course of the rest of the year, "we can see inflation come down over time and the Fed could hold off raising rates, but if things stay as they are currently, then all bets are off."
8.45am: Dow and Nasdaq called lower after CPI reading
US stocks were set to open lower on Wednesday, but investors gained a little confidence from fresh inflation data ahead of the opening bell, while there were conflicting Middle East messages that pushed oil prices higher.
Futures pointed to a weaker start on Wall Street, with the Dow Jones, the S&P 500 and the Nasdaq on course to open around 0.5-0.6% lower, trimming earlier expected losses that were nearer 1%.
The latest consumer price index figures offered a mixed picture for markets. Headline inflation rose 0.5% in May month-on-month, down from 0.6% in April, while the headline annual CPI rate rose to 4.2% from 3.8%, in line with forecasts.
Core CPI, which strips out food and energy prices, increased 0.2% on the month, broadly in line with forecasts, while annual core CPI edged up to 2.9% from 2.8%, marking the first time since December 2022 that the 12-month reading was higher than the equivalent year-earlier figure.
Analysts said the data supported a cautious rather than hawkish approach from the Federal Reserve, with no immediate pressure for policymakers to tighten further.
Investors remain focused on geopolitics, with oil prices lifted after President Donald Trump threatened fresh strikes against Iran, in an interview with Fox News.
This followed shortly after he published a post saying Tehran had "taken too long to negotiate a deal that would have been great for them, now they will have to pay the price".
TWI crude approached $90, boosting energy stocks but reviving concerns about the inflationary impact of higher fuel costs.
The inflation report also comes ahead of what could be a more revealing June reading, with average US gasoline prices currently running below May levels.
Wall Street enters the session after a mixed Tuesday, when technology stocks retreated and the Nasdaq fell 251 points, or 1%, to 25,679, while the S&P 500 slipped 19 points, or 0.3%, to 7,387.
The Dow managed a modest gain, rising 86 points, or 0.2%, to close at 50,872 as investors rotated away from some of the market's biggest AI winners into blue chips such as Sherwin-Williams, Home Depot, Nike, P&G, Coca-Cola and Nike.