Stocks opened higher Wednesday as market participants cheered upbeat inflation data and encouraging news on the U.S.-China trade front, but turned lower into the close.
Ahead of the opening bell, data from the Bureau of Labor Statistics showed the Consumer Price Index (CPI) rose 0.1% month over month in May, slower than April's 0.2% rise and the 0.2% increase economists expected.
The May CPI was 2.4% higher year over year, a slight uptick from the 2.3% increase seen the month prior and in line with economists' projections.
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Core CPI, which excludes volatile food and energy prices and is seen as a more accurate gauge of underlying inflation trends, was up 0.1% from April to May and 2.8% year over year. Economists had expected core CPI to be up 0.3% and 2.9%, respectively.
While this is welcome news on Wall Street, not everyone is sounding the all clear just yet. "CPI's dip under 2.5% in the spring months might be as good as it gets this year for inflation," says Comerica Chief Economist Bill Adams.
"Wobbly" consumer demand was likely a reason for the tame data, Adams notes, adding that the Fed's Beige Book "has reported anecdotes of consumers acting skittish due to anxiety about the economy."
As a result, several "businesses likely discounted in May to keep customers coming in the door," the economist says.
However, he believes "there's a limit to how long businesses will absorb higher input prices," and expects inflation to pick up in the second half of the year.
Trump declares U.S.-China trade deal as "done"
Sentiment also got a lift after the Trump administration announced a tentative trade deal with China.
High-level negotiations kicked off in London this week, and earlier today, President Trump posted on his Truth Social platform that a deal with China "IS DONE."
While the exact terms have yet to be released, the two countries are reportedly returning to the framework agreed to in Geneva, Switzerland, last month.
Additionally, China has agreed to supply temporary rare earth export licenses to U.S. companies. In return, Washington will allow the sale of products such as jet engines and ethane to Beijing.
Steel stocks slide on U.S.-Mexico trade talks
Reports also indicate that the U.S. and Mexico are nearing a deal to reduce the 50% tariffs Trump imposed on steel imports earlier this month.
According to Bloomberg, an agreement between the two countries could include a quota-type situation, where steel imports from Mexico will remain tariff-free as long as they're below a certain level.
In reaction, shares of U.S.-based steelmakers Cleveland-Cliffs (CLF, -8.1%), Nucor (NUE, -6.1%) and Steel Dynamics (STLD, -2.8%) all tumbled today.
Chewy drops after earnings
Chewy (CHWY) was another notable decliner on Wednesday, sinking 11.0% after the online pet supplies retailer reported earnings.
While the company disclosed higher-than-expected adjusted earnings per share and revenue for its fiscal first quarter, its GAAP net income – a key earnings term investors should know – came up short of what Wall Street expected.
And as Jay Woods, chief global strategist at Freedom Capital Markets, wrote in emailed commentary earlier this week, the consumer discretionary stock was overbought heading into earnings, having surged 45% since April 7.
Any pullbacks, Woods said, would present "a good opportunity to adopt this name into your portfolio as the long-term technicals look great and the company is known for its loyal user base."
IBM hits new highs
On the positive side of today's ledger was International Business Machines (IBM), which jumped 1.9% to notch a new record close of $281.64. It was also one of the best Dow Jones stocks on Wednesday.
Boosting shares of Big Blue was news that the company is on pace to build a large-scale fault-tolerant quantum computer. According to a June 10 press release, the IBM Quantum Starling will be delivered by 2029, "and is expected to perform 20,000 times more operations than today's quantum computers."
The news created a halo for other quantum computing stocks, too, with Quantum Computing (QUBT, +25.4%) and Rigetti Computing (RGTI, +11.4%) seeing notable gains today.
As for the main indexes, the Dow Jones Industrial Average closed fractionally lower at 42,865, the S&P 500 was 0.3% lower at 6,022, and the Nasdaq Composite had shed 0.5% to 19,615.
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