U.S. stock markets closed lower on Wednesday, June 4th, as concerns over persistent inflation driven by Middle East tensions pushed oil prices and U.S. Treasury yields higher.
The Dow Jones Industrial Average fell 620.72 points, or 1.21%, to 50,687.07. The Nasdaq Composite dropped 239.93 points, or 0.90%, to 26,853.98, while the S&P 500 declined 56.10 points, or 0.74%, to 7,553.68.
Oil prices advanced following a new round of strikes between the U.S. and Iran. West Texas Intermediate crude futures rose 2% to approximately $96 per barrel, and Brent crude increased 2% to around $98 per barrel.
U.S. President Trump stated on Wednesday that Iran had agreed not to possess nuclear weapons but added, "they could change their mind."
His remarks came amid escalating Middle East tensions, which had already been pushing oil prices upward.
Late Tuesday, Kuwait's military announced on social media that its air defense systems were "intercepting hostile targets." The U.S. Central Command later stated that U.S. forces successfully intercepted Iranian ballistic missiles and drones and conducted a "defensive strike" on Qeshm Island in response to "Iran's attempts to attack in the Middle East."
Alongside rising oil prices, U.S. Treasury yields climbed on Wednesday, with the 10-year yield nearing 4.5% and the 30-year yield approaching 5%. Yields extended their gains following a robust ADP employment report for May and data showing the services sector expanded last month at only a slightly slower pace.
Sean Snyder, an economic strategist at Potomac Fund Management, noted, "The reason the market is selling off today is that rate cuts may not be so easy with growth seemingly accelerating."
According to the CME FedWatch Tool, markets are pricing in at least one 25-basis-point interest rate hike by the Federal Reserve before year-end.
Snyder added, "The demand destruction people were expecting hasn't materialized."
Declines in artificial intelligence-related stocks also weighed on the broader market. NVIDIA fell about 3%, Dell Technologies dropped over 4%, and Oracle declined nearly 6%. Microsoft also shed 3%.