The rally in US stocks stalled on Wednesday as clashes between the US and Iran put further strain on a fragile ceasefire agreement, while also driving oil higher.
The S&P 500 Index closed down 0.7%, snapping a winning streak that tied for the longest since 1995. Meanwhile, the Nasdaq 100 Index fell 0.3% as software stocks dropped for a second consecutive day. Brent crude advanced 2.8% to $96.
"We are no longer watching a delicate ceasefire, instead what is occurring is more akin to a low-intensity conflict," said Chris Beauchamp, chief market analyst at IG. "This simply leaves the vital issue of oil supplies unresolved, and the clock continues to tick down towards doomsday for oil inventories and the global economy."
The US and Iran clashed again overnight in the most serious flare-ups since the ceasefire came into effect, with Kuwait and Bahrain both caught in the crossfire. Rising tensions between Washington and Tehran have been a key theme this week, with Israel's operations in Lebanon further complicating matters.
| Outside of the Middle East, investors kept watch of economic data. Private-sector payrolls rose by 122,000 in May, according to ADP Research, which is the most in more than a year. The data signals that the labor market could be gathering momentum despite the fallout effects of the war in Iran. "The tailwinds from fiscal and monetary policy, the AI boom, and the unwind of last year's policy uncertainty are outweighing headwinds from the Iran war," said Bill Adams, chief US economist at Fifth Third Commercial Bank. More labor data is on the horizon for traders to pore over. Initial jobless claims will be released on Thursday, while the monthly employment report for May is due Friday. AI Rally FaltersThe rally in artificial-intelligence stocks paused on Wednesday as the risk-on mood started to dissipate. UBS Group AG's basket of AI winners fell 1.4%, snapping a four-session winning streak. Even as AI-related names pulled back, Marvell Technology Inc. shares advanced 3.7% to build on Tuesday's 33% jump. The semiconductor and networking company's surge came after Nvidia Corp. Chief Executive Officer Jensen Huang predicted the firm would be the next business to hit $1 trillion in valuation. The valuation will soar now that the age of "useful AI has arrived," Huang said Tuesday. While investors have had a risk-on tone this week, the pace of the rally has moderated, according to Capital.com's Daniela Hathorn. The "tension" between strong growth and persistent inflation continues to be a key driver, she added. "For now, risk appetite remains supported, but with stretched valuations and shifting monetary policy expectations, markets appear increasingly sensitive to any signs that the earnings and growth story may begin to soften," Hathorn said. In terms of single-stock moves, alternative asset managers including Blackstone Inc. and KKR & Co. Inc. fell after Cliffwater LLC's flagship private credit fund reported even larger redemption requests than in the first quarter. Global Payments Inc. fell 8.3% after Susquehanna lowered its price target on the stock, noting Middle East travel exposure will remain a "burden." Meanwhile, Palo Alto Networks Inc. dropped 5.6% despite releasing an adjusted earnings forecast that was stronger than expected. ALSO READ: Stock Market Today: All You Need To Know Going Into Trade On June 4 Sectors in Focus
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