Key Takeaways:
Wall Street's five-day record streak ended Wednesday as the Nasdaq slumped more than 1%, dragged by a software selloff and rising oil prices above $95.
The Nasdaq fell more than 1% and the S&P 500 dropped 0.7% as software stocks reversed and oil topped $95 on Iran tensions.
"Tech doesn't necessarily have to go down from here, but it's highly unlikely to keep up this degree of outperformance in the near term," said Paul Hickey, co-founder at Bespoke Investment Group.
The Dow Jones Industrial Average lost 452 points, or 0.9%. The iShares Expanded Tech-Software Sector ETF slid 4%, erasing part of a furious rebound that had lifted the group over the past week. The Philadelphia Semiconductor Index's gain narrowed to less than 0.8%. Breadth was negative across the S&P 500, with decliners outpacing advancers by a ratio of more than 2-to-1.
The pullback puts at risk a streak of five consecutive record closes for the three major indexes, the longest such run since 2017. Traders now turn to Friday's nonfarm payrolls report for the next catalyst on the path of interest rates.
The selloff drew additional fuel from the bond market, where the 10-year Treasury yield rose 10 basis points to 4.49% after the ADP private payrolls report showed 122,000 jobs added in May, beating the consensus estimate. The data reinforced expectations that the Federal Reserve will hold rates steady at its June meeting, with the CME FedWatch tool pricing in less than a 40% chance of a cut.
Oil prices extended their advance, with West Texas Intermediate crude climbing 1.6% to $95.23 a barrel, as diplomatic efforts to reopen the Strait of Hormuz remained unresolved. President Donald Trump said talks with Iran had been continuous over the past five days, but no deal has been reached. The dollar strengthened, with the WSJ Dollar Index rising 0.2% to 99.44, adding pressure on multinational companies' overseas earnings.
The VIX, Wall Street's fear gauge, rose 2.2% to 16.11, still below its long-term average of about 20, suggesting the selloff has not yet triggered panic-level hedging.
This article is for informational purposes only and does not constitute investment advice.
