U.S. stocks closed lower on Wednesday as investors paused after the recent market rally, despite promising inflation data and a tentative trade agreement between the U.S. and China. The S&P 500 declined by 0.3%, ending its three-day winning streak. Meanwhile, the Nasdaq dropped by 0.5%, and the Dow remained unchanged. The Consumer Price Index for May rose by only 0.1% month-over-month, falling short of expectations. Core inflation also showed a softer increase, potentially easing the Federal Reserve's need to raise interest rates.
On the trade front, U.S. and Chinese negotiators reached a preliminary agreement. This deal includes China providing rare earths and the U.S. relaxing restrictions on Chinese student visas. However, the agreement lacked specifics regarding tariffs and export controls, which tempered investor optimism. President Trump announced that the deal was "done," pending final approval from both himself and President Xi. Commerce Secretary Howard Lutnick suggested that a decision could be forthcoming within days. From a sector perspective, consumer discretionary and materials stocks experienced the most significant declines, while energy stocks saw gains.
