Wall Street retreated from its record highs on Tuesday as a slump in artificial intelligence stocks and rising oil prices weighed on the market. The Dow Jones Industrial Average fell 0.5%, the S&P 500 dropped 0.7%, and the Nasdaq Composite declined 1.1%. The sell-off was led by major tech companies heavily invested in AI, including Nvidia and Microsoft, which saw their shares drop amid concerns over valuation and regulatory scrutiny.
Consumer Prices Hit Highest Since May 2023
The latest data from the U.S. Bureau of Labor Statistics showed that consumer prices rose 3.4% year-over-year in April, the highest since May 2023. The increase was driven by higher costs for shelter, gasoline, and food. Core inflation, which excludes volatile food and energy prices, also rose 3.6% annually, indicating persistent price pressures.
Oil Prices Surge
Oil prices climbed sharply, with West Texas Intermediate crude futures rising 2.5% to $83.50 per barrel, and Brent crude reaching $88.20 per barrel. The increase was attributed to supply concerns following OPEC+ production cuts and geopolitical tensions in the Middle East. Rising energy costs added to investor anxiety about inflation and its impact on corporate profits.
Market Analysts Weigh In
“The market is reacting to a combination of factors: AI stocks are overextended, and the inflation data reminds us that the Federal Reserve may keep rates higher for longer,” said Mark Orlando, a market strategist at TD Ameritrade. He added that while Iran tensions are a concern, investors are more focused on domestic inflation and corporate earnings.
Other Market Movers
In Canada, the S&P/TSX Composite Index fell 0.4%, dragged down by energy and technology stocks. The Canadian dollar weakened against the U.S. dollar, trading at 73.5 cents U.S. Meanwhile, gold prices slipped 0.3% to $2,350 per ounce as the dollar strengthened.
Global Markets Mixed
European stocks closed lower, with the Stoxx Europe 600 down 0.6%, while Asian markets were mixed. Japan's Nikkei 225 rose 0.3%, but China's Shanghai Composite fell 0.2% amid ongoing trade tensions.
Investors will now focus on upcoming Federal Reserve meeting minutes and corporate earnings reports for further direction.
