Inflation came in hot enough to spook the market. But that is not really what pushed stocks down on Wednesday.
The bigger weight was the AI trade unwinding.
Prices rose 4.2% in May from a year earlier. That is the fastest pace in three years, and higher energy costs did most of the lifting.
There was a calmer signal underneath. Core inflation leaves out food and gas to show the steady trend.
It rose just 0.2% on the month, less than expected. So the scary number had a softer story behind it.
Tech stocks slipped anyway. The Nasdaq fell about 1% and the S&P 500 dipped 0.3%, while the Dow ended slightly higher.
The real pressure came from tech, not inflation. Super Micro Computer is a key AI server maker. It dropped 12% after saying it would raise $7 billion for parts. Chipmakers slid right with it.
The selling began in Asia overnight. It then carried straight into the U.S. open.
It all comes back to one worry. Did AI stocks run up too far, too fast?
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The damage was not spread evenly. Some corners got hit much harder than others.
Freight stocks dropped after Amazon opened its trucking service to outside firms. Old Dominion fell more than 6%.
Banks held up better. Citigroup even rose after a public shout-out from President Trump.
Overseas, the selling was worse. SoftBank lost about 10%, and South Korea's Kospi sank 4.52%.
The price pressure was global too. In Japan, wholesale prices jumped more than 6% from a year ago, and China's factory prices hit a near four-year high.
The mood stayed cautious all day. Buyers played it safe and stayed on the sidelines.
Among chips, the red was broad. Big names like Micron and Broadcom all gave ground.
The sell-off had one clear root. It was less about prices and more about AI nerves.
That fear has been building all week. Wednesday just brought it back to the surface.
For now, buyers are sitting tight. They want a reason to believe before jumping back in.
All eyes turn to Oracle. It reports earnings after the bell, and its numbers will hint at whether big AI spending is holding up.
There is also the Middle East. Fresh U.S.-Iran tension has oil prices swinging day to day.
The U.S. struck Iran again this week, after one of its helicopters was downed. That keeps a floor under oil.
Not every stock fell. Cracker Barrel and Chewy rose on strong results, a sign money is hunting for safer corners.
Oracle's numbers after the close are the next real clue.
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