S&P 500 Halts Rally Near Record as Big Tech Swoons: Markets Wrap

(Bloomberg) — A slide in big tech dragged down stocks, following a rally that drove the S&P 500 to a striking distance of its all-time highs. Earlier gains were fueled by surprisingly benign inflation data that stoked bets on Federal Reserve rate cuts, spurring a drop in bond yields.

Equities halted a three-day advance, with Apple Inc. down about 2% and Tesla Inc. little changed after a nearly 3% surge. In late hours, Oracle Corp. surged after revenue beat estimates. Treasuries also climbed after a solid $39 billion sale of 10-year debt. The advance was led by shorter maturities, with two-year yields dropping below 4%. The dollar hit the lowest since 2023.

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US core inflation rose in May by less than forecast, suggesting companies are largely holding back on passing higher tariff costs through to consumers. President Donald Trump said a trade framework with China has been completed, with Beijing supplying rare earths and magnets “UP FRONT” and the US allowing Chinese students into its colleges and universities.

Despite Wednesday’s losses, the S&P 500 has seen a torrid rally from the brink of a bear market in April. Much of the bounce, which topped 20%, has been pinned on hopes that Trump would lower his tariffs after reaching deals with countries around the world.

“Given the rebound in equities and elevated expectations, the bar has been raised to break out to a fresh high, likely requiring an increase in earnings expectations,” said Mark Hackett at Nationwide.

The string of below-forecast inflation readings adds to evidence that consumers have yet to feel the pinch of tariffs — perhaps because the most punitive levies have temporarily been on pause, or thanks to companies so far absorbing the extra costs or boosting inventory. However, if higher levies set in, shielding consumers from those costs will become more difficult.

“It’s far too early to call tariffs an inflation non-event,” said Ronald Temple at Lazard. “Ultimately, companies will have to swallow some combination of price increases to pay for higher tariffs, cost cuts to offset increased import costs, and/or lower profit margins. I don’t see evidence in this early report of widespread price increases, but I do expect higher inflation this year as firms react to the tariffs.”

To Bret Kenwell at eToro, while the latest inflation report didn’t come in hot, the consumer price index hasn’t made a lot of progress lately. Looking forward, investors should pay close attention to the Fed next week, he said.

“So far, Chair Jerome Powell has walked a tightrope when it comes to monetary policy,” Kenwell noted. “While Powell doesn’t give many clues on future Fed decisions, and does a good job not to tip his hand, investors crave certainty and will be looking for some answers during next week’s Fed press conference.”

Following the report, Trump reiterated his call for the Fed to lower interest rates by “one full point.” “Would pay much less interest on debt coming due. So important!!!” he posted on Truth Social.

Money markets projected about two Fed reductions by the end of 2025 as traders boosted bets on a September cut to around 75%. 

Corporate Highlights:

• Shares of several American steelmakers fell after the US and Mexico closed in on a deal to remove tariffs on some imports of the metal, prompting speculation that other nations could also get concessions.
• The Air Force has cut in half its request to Congress for its signature F-35s, dealing a blow to Lockheed Martin Corp., the top US defense contractor.
• Trump’s nominee to lead the Federal Aviation Administration vowed to hold Boeing Co. accountable for the quality of its jets as the US planemaker works to produce its cash cow 737 Max aircraft at higher rates.
• Bank of America Corp. Chief Executive Officer Brian Moynihan said investment-banking fees will likely drop about 25% in the second quarter as Trump’s policy announcements continue to chill dealmaking.
• Nvidia Corp. Chief Executive Officer Jensen Huang said Wednesday that quantum computing is reaching an inflection point and will be powerful enough in the coming years to help “solve some interesting problems” globally.
• General Motors Co. plans to invest $4 billion in its US plants over the next two years in response to Trump’s tariffs in a move that reduces production in Mexico while boosting domestic output of some of its some of its top-selling gas-powered vehicles.
• Victoria’s Secret & Co. projected profit for the current quarter that trailed Wall Street’s expectations — a hit to the fledging turnaround being led by a chief executive officer in her first year.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.3% as of 4 p.m. New York time
• The Nasdaq 100 fell 0.4%
• The Dow Jones Industrial Average was little changed
• The MSCI World Index fell 0.1%
• Bloomberg Magnificent 7 Total Return Index fell 0.8%
• The Russell 2000 Index fell 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro rose 0.5% to $1.1483
• The British pound rose 0.3% to $1.3539
• The Japanese yen rose 0.2% to 144.63 per dollar

Cryptocurrencies

• Bitcoin fell 1.1% to $108,771.28
• Ether rose 1.4% to $2,813.97

Bonds

• The yield on 10-year Treasuries declined six basis points to 4.41%
• Germany’s 10-year yield advanced one basis point to 2.53%
• Britain’s 10-year yield advanced one basis point to 4.55%

Commodities

• West Texas Intermediate crude rose 4.5% to $67.92 a barrel
• Spot gold rose 0.7% to $3,347.39 an ounce

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