Wall Street Slips Under Pressure from Inflation and Escalating Tensions in Iran

US Stocks Slide as Inflation Data and Iran Tensions Weigh on Markets

The S&P 500 and the Nasdaq Composite eased from record highs on Tuesday, May 12, as hotter-than-expected inflation data and an increasingly tenuous U.S.-Iran ceasefire prompted investors to take money off the table near the end of a robust first-quarter earnings season.

The S&P 500 lost 40.25 points, or 0.54%, to 7,372.82, while the Nasdaq Composite lost 360.64 points, or 1.37%, to 25,913.48. The Dow Jones Industrial Average fell 4.18 points, or 0.01%, to 49,700.29. Despite the selloff, the S&P 500 and the Nasdaq remain close to all-time highs.

The Nasdaq was dragged down the most by weakness in tech shares, which suffered the largest percentage loss among the 11 major sectors in the S&P 500. In contrast, healthcare stocks, buoyed by a jump in Humana, helped limit the Dow's losses.

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Humana advanced 5.4% following a 36% price target hike by Bernstein. Zebra Technologies jumped 14.4% after the barcode scanner maker raised its annual sales growth forecast, betting on robust demand for its products that help automate manufacturing workflows.

However, other stocks were not as fortunate. GameStop dipped 1.3% following eBay's rejection of the meme stock trailblazer's $56 billion takeover bid. Hims & Hers Health tumbled 12.5% after the telehealth firm missed Wall Street estimates for first-quarter revenue and posted a surprise loss.

The economic data showed consumer prices rising at a faster pace than analysts anticipated, with the Consumer Price Index (CPI) hotter than expected. This has raised the probability that spiking energy prices could metastasize into broader, more entrenched inflation, which has all but squelched any hopes for an interest rate cut from the Fed this year.

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The odds of a rate hike are rising, with financial markets pricing in a 31.5% likelihood that the central bank will implement a 25-basis-point increase to its Fed funds target rate in December, up from 21.5% on Monday, according to CME's FedWatch tool.

Financial markets are also focused on valuations, macroeconomics, and geopolitical developments. The PHLX Semiconductor index tumbled 4.8%, but has soared 62.4% this year, benefiting from the fervor about artificial intelligence.

Declining issues outnumbered advancers by a 2.12-to-1 ratio on the NYSE, while there were 116 new highs and 114 new lows on the NYSE. On the Nasdaq, 1,493 stocks rose and 3,178 fell as declining issues outnumbered advancers by a 2.13-to-1 ratio.