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Wall Street’s record rally slowed on Wednesday as investors moved with caution after a fresh Middle East flare-up lifted oil prices and Treasury yields. Major indexes pulled back from record highs, while technology and asset management stocks led the declines.
US stocks fell after a strong run that pushed all three major indexes to record closes on Tuesday. The Dow Jones Industrial Average dropped around 0.8%, while the S&P 500 slipped 0.4%. Meanwhile, the NASDAQ Composite fell 0.5% as losses in large technology names weighed on sentiment.
The S&P 500 had closed above 7,600 for the first time a day earlier. However, Wednesday’s pullback showed that investors were less willing to chase gains while oil prices and bond yields moved higher. Declining stocks also outnumbered gainers on both the NYSE and NASDAQ.
Oil prices climbed after new strikes raised concerns over supply risks. West Texas Intermediate traded near $95 per barrel, while Brent crude moved toward $97 per barrel. The move followed reports of Iranian missile and drone attacks, along with US military action near the Strait of Hormuz.
The Middle East conflict has kept energy markets under pressure for months. Moreover, concerns over the Strait of Hormuz remain central to oil trading, as the route carries a large share of global crude flows. JPMorgan analysts said the waterway could reopen in June as oil inventory pressure grows.
Higher oil prices added to inflation concerns. Treasury yields also moved up, with the 10-year yield approaching 4.5% and the 30-year yield nearing 5%. The rise came after stronger private payroll data and ahead of Friday’s labor market report.
Technology shares led the decline after powering the recent market rally. Software stocks fell sharply, while Datadog, Palo Alto Networks, and IBM dropped between 6.7% and 7.7%. NVIDIA also declined more than 2%, while Dell Technologies, Oracle, and Microsoft traded lower.
The losses came as investors reassessed the fast rise in AI-linked stocks. The S&P 500 technology sector now accounts for more than 39% of the index’s market value, above levels seen during the 2000 internet bubble. Semiconductors have led the rally, with Micron, Intel, and AMD posting strong gains since the March market low.
However, investors remain focused on whether AI demand can keep supporting high valuations. Matthew Maley of Miller Tabak said, “If the small number of tech stocks that have been leading this market higher roll over, by definition, the indexes are going to roll over.” His comment reflected concern over market concentration.
Broadcom shares also slipped ahead of quarterly results due after the closing bell. The stock had gained 14% in the prior four sessions, making its earnings a fresh test for AI-linked momentum. Meanwhile, Marvell Technology rose 2% and reached a market value of $250 billion after NVIDIA CEO Jensen Huang called it the next ‘trillion-dollar company.’
Economic data added another layer to the market’s cautious tone. The ISM services index came in at 53.6 for May, slightly below forecasts. New orders weakened, while business activity improved and employment stayed in contraction territory.
Investors also looked ahead to Friday’s labor market report. That data could shape expectations for Federal Reserve policy after bond yields moved higher. Money markets now expect the Fed to hold rates steady for the rest of the year, though the chance of a 25-basis-point hike has increased.
Alexander Lis, chief investment officer at Social Discovery Ventures, said, “We won't have any drawdown in US stocks without some solid evidence of the Middle East situation's influence on unusually high inflation prints.” His comment pointed to inflation data as a key risk for the rally.
New Fed Chair Kevin Warsh also started his four-year term and pledged to follow ‘the best of the Fed's traditions’ in a note to staff. Investors are watching how the central bank responds if higher energy prices feed into inflation readings.
Asset managers declined after Switzerland’s Partners Group capped withdrawals from an $8.6 billion private equity fund. KKR, Blackstone, Blue Owl, and Ares Management fell between 5.3% and 6.3% as investors reacted to concerns over private-market liquidity.
Meanwhile, GameStop gained 8.5% after reporting higher quarterly revenue and unveiling a $2 billion share buyback program. The move made the stock one of the day’s stronger performers despite broader weakness across equities.
SpaceX also drew market attention after plans emerged to price its IPO at $135 per share. The company aims to raise a record $75 billion, with its roadshow expected to attract strong investor interest.
Meghan Shue of Wilmington Trust said, “I’m not necessarily calling for a sharp reversion in the market, but I think it makes a lot of sense to see it pause here.” She added that a mild pullback could bring more volatility as summer trading slows.
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