The S&P 500 Index ($SPX) (SPY) on Wednesday closed down -0.74%, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -1.21%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.29%. June E-mini S&P futures (ESM26) fell -0.78%, and June E-mini Nasdaq futures (NQM26) fell -0.32%.
Stock indexes retreated on Wednesday, with the Nasdaq 100 falling from a new record high. The broader market was under pressure on Wednesday as the US and Iran clashed overnight, sending WTI crude oil prices up more than +2% to a 1.5-week high and putting peace plans in doubt. In addition, weakness in software companies, cybersecurity, and private credit stocks on Wednesday weighed on the overall market.
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Crude oil price jumped more than +2% on Wednesday after US forces intercepted Iranian ballistic missiles and drones aimed at neighboring Gulf states, escalating tensions and reducing chances that the Strait of Hormuz will open any time soon. The Tasnim news agency reported that Iranian Foreign Minister Abbas Araghchi said that “Communications between Iran and the US have not been cut off, but no tangible progress has been achieved in the negotiating process.”
On the positive side, AI-infrastructure spending continues to support technology stocks. Marvell Technology rose more than +3% on Wednesday, adding to Tuesday’s 32% surge, to lead chipmakers higher after Nvidia CEO Huang predicted the company would be the next to hit a $1 trillion valuation, more than five times its current market capitalization.
Signs of strength in the US economy are also supportive of stocks after Wednesday’s reports showed the May ADP employment change, the May ISM services index, and Apr factory orders rose more than expected.
The US May ADP employment change rose 122,000, slightly stronger than expectations of 120,000 and the biggest increase in 16 months.
The US May ISM services index rose +0.9 to 54.5, stronger than expectations of 53.8. The May ISM services prices paid sub-index rose +0.6 to a 3.75-year high of 71.3, although below expectations of 72.3.
US Apr factory orders rose +4.8% m/m, stronger than expectations of +4.6% m/m and the largest increase in 11 months.
US MBA mortgage applications fell -2.5% in the week ended May 29, with the purchase mortgage sub-index down -2.9% and the refinancing mortgage sub-index down -2.3%. The average 30-year fixed rate mortgage fell -8 bp to 6.57% from 6.65% in the prior week.
The Fed Beige Book was hawkish, stating slight to moderate economic growth across most Fed districts through May 27, with employment little changed and most of the 12 Fed districts reporting higher inflation than in the previous report.
New York Fed President John Williams said, “Monetary policy is exactly in the right place. I don’t see any need to raise or lower interest rates right now.”
The markets are discounting a 3% chance of a +25 bp rate hike at the next FOMC meeting on June 16-17.
The generally favorable Q1 earnings season is winding down. As of Wednesday, 84% of the 485 S&P 500 companies that reported Q1 earnings have beaten estimates. Q1 S&P 500 earnings are projected to climb +12% y/y, according to Bloomberg Intelligence. Stripping out the technology sector, Q1 earnings are projected to increase around +3%, the weakest in two years.
Overseas stock markets settled mixed on Wednesday. The Euro Stoxx 50 closed down -0.89%. China’s Shanghai Composite closed up +0.22%. Japan’s Nikkei Stock Average rallied to a new record high and closed up +2.50%.
Interest Rates
September 10-year T-notes (ZNU6) on Wednesday closed down -8 ticks, and the 10-year T-note yield rose +4.6 bp to 4.489%. T-note prices were under pressure on Wednesday amid an escalation of US-Iran tensions, which lifted WTI crude oil by more than +2% to a 1.5-week high, boosting inflation expectations. T-notes added to their losses on Wednesday after US economic reports showed the May ADP employment change, the May ISM services index, and Apr factory orders rose more than expected, hawkish factors for Fed policy. The Fed Beige Book also reported rising inflation pressures and was bearish for T-notes.
European government bond yields moved higher on Wednesday. The 10-year German Bund yield climbed to a 1.5-week high of 3.042% and finished up +6.0 bp to 3.035%. The 10-year UK gilt yield rose to a 1.5-week high of 4.939% and finished up +7.2 bp to 4.931%.
The Eurozone May S&P composite PMI was revised upward by +1.0 to 48.5 from the previously reported 47.5.
Eurozone Apr PPI rose +4.9% y/y, right on expectations and the fastest pace of increase in more than 3 years.
The UK May S&P services PMI was revised upward by +1.4 to 49.3 from the previously reported 47.9.
Swaps are discounting a 98% chance of a +25 bp ECB rate hike at its next policy meeting on June 11.
US Stock Movers
Software stocks sold off on Wednesday, pressuring the broader market. Datadog (DDOG), Atlassian Corp (TEAM), and ServiceNow (NOW) closed down more than -7%, and International Business Machines (IBM) closed down more than -6% to lead losers in the Dow Jones Industrials. Also, Palantir Technologies (PLTR) closed down more than -6%, and Oracle (ORCL) closed down more than -5%. In addition, Salesforce (CRM) closed down more than -4%, and Autodesk (ADSK) and Intuit (INTU) closed more than -3%. Finally, Microsoft (MSFT) and Adobe Systems (ADBE) closed down more than -2%, and Workday (WDAY) closed down more than -1%.
Cybersecurity stocks retreated on Wednesday, led by a -7% decline in Okta (OKTA) and a -6% decline in Zscaler (ZS). Also, Palo Alto Networks (PANW) closed down more than -5% despite reporting better-than-expected Q3 earnings, as it failed to meet elevated buy-side expectations. In addition, Cloudflare (NET) and CrowdStrike Holdings (CRWD) closed down more than -2%, and Fortinet (FTNT) closed down more than -1%.
Private credit stocks faltered on Wednesday as the 17% redemption requests for Cliffwater’s private credit fund weighed on alternative asset stocks. Carlyle Group (CG) closed down more than -4%, and Ares Management (ARES), KKR & Co (KKR), Blackstone (BX), and Blue Owl Capital (OWL) closed down more than -3%. Also, Apollo Global Management (APO) and BlackRock (BLK) closed down more than -2%.
Chipmakers and AI-infrastructure stocks rallied on Wednesday, providing support to the overall market. Sandisk (SNDK) closed up more than +6% to lead gainers in the Nasdaq 100, and Western Digital (WDC) closed up more than +5%. Also, Intel (INTC), Advanced Micro Devices (AMD), and ON Semiconductor (ON) closed up more than +4%,and Analog Devices (ADI), KLA Corp (KLAC), and Qualcomm (QCOM) closed up more than +3%. In addition, Applied Materials (AMAT), ARM Holdings Plc (ARM), and Lam Research (LRCX) closed up more than +2%.
Global Payments (GPN) closed down more than -8% after Susquehanna cut its price target on the stock to $111 from $119, noting that Middle East travel exposure will remain a “burden.”
Ulta Beauty (ULTA) closed down more than -4% after analysts noted the company’s annual guidance implies the outlook for the second half of the year is weaker than expected.
Gitlab (GTLB) closed down more than -2% after announcing that it will cut about 14% of its workforce and exit 22 countries as part of a restructuring.
Medtronic Plc (MDT) closed up more than +6% after reporting Q4 revenue of $9.81 billion, above the consensus of $9.64 billion.
GameStop (GME) closed up more than +6% after reporting Q1 net sales rose +14% y/y to $835.3 million and said its board of directors approved a $2 billion share repurchase authorization.
Meta Platforms (META) closed up more than +4% after announcing it is selling access to an artificial intelligence agent called Meta Business Agent, which will chat with a business’s customers over WhatsApp, Messenger, and Instagram.
Marvel Technology (MRVL) closed up more than +3% today, adding to Tuesday’s +32% surge, after Nvidia CEO Huang predicted that the company will be the next to hit a $1 trillion valuation, more than five times its current market capitalization.
Sherwin-Williams (SHW) closed up more than +1% after the company and Nippon Paint abandoned efforts to jointly acquire Akzo Nobel.
Earnings Reports(6/4/2026)
Brown-Forman Corp (BF/B), Ciena Corp (CIEN), Cooper Cos Inc/The (COO), Docusign Inc (DOCU), Guidewire Software Inc (GWRE), Lululemon Athletica Inc (LULU), Rubrik Inc (RBRK), Samsara Inc (IOT), Toro Co/The (TTC).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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