[New York Stock Exchange] Indices Fall Despite Mild Inflation and US-China Deal... Tech Stocks Lead Decline

Market Takes a Breather as Tech Stocks Decline
May CPI Rises 2.4%, Below Expectations
Tariff-Driven Inflation Remains Limited
US-China Talks Conclude: "China Agrees to Early Rare Earth Supply"

All three major indices on the New York Stock Exchange closed lower on June 11 (local time). Despite softer-than-expected inflation data and progress in trade negotiations between the United States and China, the market showed signs of fatigue after the recent rally, with technology stocks leading the decline. Rising geopolitical tensions in the Middle East also weighed on investor sentiment.

Reuters Yonhap News

On this day, the Dow Jones Industrial Average, which focuses on blue-chip stocks, ended the session at 42,865.77, down 1.10 points (less than 0.1%) from the previous trading day. The S&P 500, which tracks large-cap stocks, fell 16.57 points (0.27%) to 6,022.24. The tech-heavy Nasdaq dropped 99.11 points (0.5%) to close at 19,615.88. As a result, the S&P 500 reversed course and declined for the first time in four sessions.

By sector, technology stocks experienced notable declines. Apple fell by 1.92%. Oracle dropped by 0.64%, despite reporting better-than-expected earnings. Nvidia declined by 0.78%, and Alphabet, Google's parent company, slipped by 0.68%. In contrast, Microsoft (MS) rose by 0.36%.

The U.S. Department of Labor announced that last month’s Consumer Price Index (CPI) came in below market expectations. According to the Department of Labor, the CPI for May rose 2.4% year-on-year. This figure is slightly higher than April’s 2.3% but below the market forecast of 2.5%. The core CPI, which excludes volatile energy and food prices, increased by 2.8% year-on-year, matching April’s rate but also coming in below the market expectation of 2.9%. By category, declines in energy and service prices were notable. Analysts say that tariff-driven inflationary pressures remain limited for now. President Donald Trump has imposed a universal 10% tariff on goods from around the world since April, and additional tariffs on specific items such as steel and automobiles have also taken effect. However, due to various grace periods and ongoing trade negotiations, companies have been cautious about raising prices, so these tariffs have not yet translated into inflationary pressure.

Alexandra Wilson-Elizondo, Global Co-Chief Investment Officer of Multi-Asset Solutions at Goldman Sachs Asset Management, analyzed, "Companies are using existing inventories or slowly adjusting prices due to demand uncertainty, so tariffs are not having an immediate significant impact," and added, "While product prices may rise somewhat, service prices are likely to remain stable, making it highly probable that the uptick in inflation will be temporary."

The United States and China also concluded their second high-level trade talks in London on this day, reaching agreements such as the resumption of Chinese rare earth exports to the United States.

President Trump stated on his social networking service (SNS), Truth Social, "Trade negotiations with China have been concluded, and only final approval from President Xi Jinping and myself remains." He added, "China will proactively supply permanent magnets and all necessary rare earths," and "We will allow Chinese students to attend U.S. universities." He also said, "We are applying a total tariff of 55% on Chinese imports, and China is imposing a 10% tariff on U.S. imports," emphasizing, "Relations between the two countries are excellent."

Howard Lutnick, U.S. Secretary of Commerce, confirmed in a CNBC interview that the U.S. tariff rate on China will remain at the current level of 55% and will not change further.

Despite better-than-expected inflation data and easing U.S.-China trade tensions, the market remained cautious and entered a consolidation phase.

Geopolitical instability in the Middle East also dampened investor sentiment. Foreign media reported that the U.S. government had ordered the withdrawal of non-essential staff from the U.S. Embassy in Iraq, citing security risks in the Middle East. Previously, Iran warned that if nuclear negotiations with the United States broke down and conflict arose, it could attack all U.S. military bases in the region.

Yields on U.S. Treasury bonds declined. As inflation concerns eased and expectations for a rate cut increased, the yield on the two-year U.S. Treasury note, which is sensitive to monetary policy, fell by 6 basis points (1bp = 0.01 percentage point) from the previous day to 3.95%. The benchmark 10-year U.S. Treasury yield dropped by 5 basis points to 4.41%. According to CME FedWatch, the federal funds rate futures market reflected more than a 70% probability that the Fed will cut rates at least twice by 0.25 percentage points each this year, up from 61% the previous day.