Wall Street experienced a notable pullback as investors grappled with a hotter-than-expected inflation report and ongoing tensions between the U.S. and Iran. The S&P 500 and Nasdaq, both recently at record highs, retreated with technology shares leading the declines, reflecting growing concerns over sustained inflation and geopolitical instability.
Consumer prices rose at a rapid pace for the second month in a row in April, marking the highest annual inflation rate in nearly three years. This reinforced expectations that the Federal Reserve will maintain its current interest rate levels for an extended period rather than cutting rates as previously anticipated. Prior projections had factored in two upcoming rate reductions, but sentiment has shifted toward a steady or potentially higher rates outlook as economic pressures persist.
The stalled diplomatic efforts in the Middle East added to market unease. Negotiations between Washington and Tehran have shown little progress, with President Donald Trump describing the ceasefire efforts as being “on life support” after Iran rejected a U.S. proposal. This geopolitical deadlock sustained upward pressure on crude oil prices, further exacerbating inflation concerns among investors.
Major indices reflected the cautious mood. The Dow Jones Industrial Average dropped more than 170 points, the S&P 500 declined close to 1%, and the Nasdaq Composite saw its steepest daily loss, falling nearly 2%. Technology stocks, especially semiconductor companies, faced sharp sell-offs following their recent gains. The Philadelphia Semiconductor Index fell approximately 6%, although it remains well above its levels from the start of the quarter.
Among key movers, Intel slid nearly 10% after surging earlier in the week, while Qualcomm dropped over 13% following a record high. The losses came amid discussion from South Korean officials about redistributing tech sector profits to citizens, a proposal that rattled investor sentiment in semiconductors and mega-cap tech names. Investors appeared to take profits after a strong rally in these sectors over recent weeks.
Outside technology, Zebra Technologies rose strongly by 17% after raising its annual sales growth forecast based on heightened demand for automation equipment. By contrast, telehealth provider Hims & Hers Health plunged 15% after reporting revenues below estimates and posting an unexpected loss for the first quarter.
Market participants are now turning their attention to President Trump’s upcoming visit to China, expecting limited breakthroughs on either trade negotiations or the unresolved conflict with Iran. Meanwhile, declining stocks outpaced advancing shares by nearly three to one on the New York Stock Exchange, underscoring the current cautious investor stance amid these multiple headwinds.