Wall St muted as investors assess inflation data, Mideast developments

Wall Street’s main indexes retreated from record highs on Thursday as escalating tensions between the U.S. and Iran dampened hopes of an imminent peace deal, while investors digested key inflation data.

Tehran targeted a U.S. airbase on Thursday after Washington launched fresh strikes. The move came hours after President Donald Trump rejected a report that he was close to a compromise deal with Iran.

Oil prices jumped nearly 3%, while U.S. Treasury yields edged higher with the continued closure of the Strait of Hormuz adding to inflation worries.

Data showed U.S. inflation increased at its fastest pace in three years in April, driven by higher energy prices amid the Iran war.

“I don’t think the data changed the narrative. The number was not as bad as feared. That pushes back a little bit against some expectations for rate hikes,” said Angelo Kourkafas, senior global investment strategist at Edward Jones.

“A lot of the focus will still be on the Iran negotiations and the AI trends and these are the two things that (will) drive the narrative for equities.”

At 10:01 a.m. ET, the Dow Jones Industrial Average fell 110.97 points, or 0.22%, to 50,533.31, the S&P 500 gained 1.71 points, or 0.02%, to 7,521.68 and the Nasdaq Composite lost 6.80 points, or 0.02%, to 26,667.93.

Six of the 11 main S&P 500 sectors were in the red. The industrial sector led losses with a drop of 1.1%.

Caterpillar was down 3%, weighing on the Dow. Airlines shares declined as oil prices rose, with American Airlines, Jetblue and Southwest Airlines down between 1.5% and 2.2%.

The consumer discretionary sector was down 0.7% after gaining nearly 2% in the previous session.

AI optimism, earnings growth fuel market rally

Renewed confidence in AI and earnings growth momentum have underscored the recent rally, with all three major indexes closing at a record high on Wednesday.

The S&P 500 was on track for a ninth consecutive weekly gain, its longest winning streak since December 2023.

Marvell Technology rose 2.2% after forecasting second-quarter revenue above estimates. The company’s shares have more than doubled so far this year.

Snowflake soared 34% after the data analytics firm lifted its annual product revenue forecast and announced a five-year AI infrastructure deal worth $6 billion with Amazon Web Services.

Peers Datadog, and MongoDB rose 1.1% and 9.8%, respectively.

Dollar Tree climbed 16.8% after the discount retailer lifted its full-year profit forecast, while Best Buy added 13.5% after the electronics vendor forecast second-quarter sales above estimates.

Kohl’s gained 18.5% after the department store chain posted quarterly sales in line with estimates, and stuck to its annual targets.

Drone companies rose after the Wall Street Journal reported that the Trump administration was in talks to fund drone firms. Unusual Machines jumped 40.1% while AeroVironment and Kratos Defense & Security Solutions added 14.5% and 12.7%, respectively.

Declining issues outnumbered advancers by a 1.48-to-1 ratio on the NYSE and by a 1.28-to-1 ratio on the Nasdaq.

The S&P 500 posted 7 new 52-week highs and 7 new lows while the Nasdaq Composite recorded 49 new highs and 43 new lows.