U.S. stocks traded lower on Wednesday as investors digested the hottest inflation reading in three years while renewed military clashes between the U.S. and Iran added another layer of uncertainty to an already fragile market environment. Rising energy prices and fading enthusiasm for artificial intelligence stocks combined to pressure major indexes, extending the recent pullback in technology shares.
The Dow Jones Industrial Average slid roughly 1.2%, while the Nasdaq Composite also lost around 1.2% as semiconductor stocks remained under pressure. The S&P 500 fell nearly 1%, with investors weighing the implications of persistent inflation, higher oil prices, and the growing possibility that the Federal Reserve could keep interest rates elevated for longer.
Market Movers:
- Cracker Barrel Old Country Store (CBRL) +27.2%: Shares soared after the restaurant chain delivered a better-than-expected quarter and raised guidance, reinforcing confidence in its turnaround strategy. Comparable restaurant sales declined 2.6%, but retail sales significantly outperformed expectations, suggesting customer demand is beginning to stabilize.
- Cellectis (CLLS) +8.9%: The biotech company climbed after its CD22-targeting CAR-T therapy received FDA Regenerative Medicine Advanced Therapy designation for relapsed or refractory B-cell acute lymphoblastic leukemia. The designation could accelerate development timelines and highlights the treatment's potential to address a significant unmet medical need.
- Devon Energy (DVN) +4.8%: Shares advanced after the company updated its full-year outlook following its acquisition of Coterra Energy. Higher oil prices and plans to allocate more than 60% of its capital spending to the Permian Basin added to investor optimism.
- 3M (MMM) +3%: The industrial giant gained after CEO Bill Brown said second-quarter growth remains on track to exceed 3% organic growth expectations. Management noted that a healthy order backlog continues converting into revenue, supporting confidence in the company's recovery.
- Old Dominion Freight Line (ODFL) -9%, FedEx (FDX) -1.8%, XPO (XPO) -3.5%: Transportation stocks moved lower after Amazon announced an expansion of its shipping business, raising concerns about increased competition across the logistics sector. Investors worried the e-commerce giant could continue disrupting traditional freight and delivery companies.
- Supermicro (SMCI) -12.6%: Shares tumbled after the AI server maker unveiled plans for approximately $7 billion in equity and equity-linked financing. While the capital will help fund growing demand for AI infrastructure, the sizable offering raised dilution concerns.
- Summit Therapeutics (SMMT) -3.9%: The biotech company declined after announcing a $500 million underwritten public offering. The financing is intended to support pipeline development, but weighed on shares as investors assessed the impact of additional share issuance.
- Micron Technology (MU) -1.3% and Qualcomm (QCOM) -3.3%: Chipmakers continued to lose ground as investors rotated out of AI leaders and questioned elevated valuations. The weakness extended globally, with South Korean semiconductor stocks also posting notable declines.
- Wolfspeed (WOLF) -7.1%: Shares fell after the semiconductor manufacturer filed a registration statement allowing selling shareholders to potentially unload more than 24 million shares. The company will not receive proceeds from the sales, but the prospect of increased supply pressured the stock.
Inflation Hits Highest Level in Three Years
The latest Consumer Price Index report showed annual inflation accelerating to 4.2% in May, matching expectations but marking the highest reading since 2023. Energy remained the primary driver, with prices climbing 23.5% year over year as the ongoing Middle East conflict continued to disrupt global oil markets. Core inflation, which excludes food and energy, remained relatively contained at 2.9% annually. Even so, the combination of elevated headline inflation and resilient economic data is reinforcing expectations that the Federal Reserve could maintain restrictive monetary policy for longer than previously anticipated.
AI Trade Faces Another Reality Check
Technology stocks remained under pressure as investors continued rotating away from semiconductor names that fueled much of this year's rally. Nvidia, Broadcom, AMD, Marvell, Micron, and Qualcomm all traded lower as concerns about lofty valuations and upcoming mega-IPOs weighed on sentiment.
Attention now turns to Oracle's earnings report, which could provide another important read on enterprise AI spending. Investors are also closely watching the upcoming SpaceX IPO, with some viewing it as another catalyst for AI enthusiasm while others worry its massive valuation reflects excessive optimism across the sector.
Oil Prices Climb as Geopolitical Risks Return
Markets also grappled with renewed uncertainty in the Middle East after fresh military exchanges between the U.S. and Iran overnight. President Trump's comments that Iran had "taken too long" to negotiate added to concerns that peace talks could deteriorate further. Brent crude climbed above $94 per barrel while West Texas Intermediate crude moved above $91, reversing recent declines and reinforcing worries that higher energy costs could continue feeding inflation throughout the summer.
Looking Ahead
Investors now face a critical stretch where inflation, central bank policy, AI earnings, and geopolitical developments are all competing for attention. Oracle's results later today and Friday's highly anticipated SpaceX IPO could provide fresh catalysts, while any further escalation in the Middle East or signs of persistent inflation may keep volatility elevated as markets search for their next direction.