United States benchmark averages slipped on Wednesday (Thursday AEST), with the S&P 500 and the Nasdaq Composite halting a three-day rally as investors assessed the implications of a tentative U.S.-China trade agreement and cooler-than-expected inflation data.
The S&P 500 lost 16.6 points, or 0.3%, to close at 6,022.3, snapping its recent winning streak. The Nasdaq Composite fell 99.1 points, or 0.5%, to 19,615.9, while the Dow Jones Industrial Average finished flat at 42,865.8.
Investor sentiment was mixed following May inflation data. The consumer price index (CPI) rose by 2.4% year-on-year, slightly below the 2.5% forecast.
Monthly CPI increased by just 0.1%, while core CPI, which excludes volatile food and energy prices, also undershot expectations.
Meanwhile, talks between U.S. and Chinese officials in London concluded with consensus on a preliminary trade framework.
However, both sides indicated that the agreement remained subject to final approval by U.S. President Joe Biden and Chinese President Xi Jinping.
As part of the tentative deal, China would permit the export of rare earth minerals. In addition, the United States would ease restrictions on sales of advanced technology to Chinese firms.
Despite diplomatic progress, U.S. Commerce Secretary Howard Lutnick said existing tariffs on Chinese imports would remain unchanged for now.
President Donald Trump commented on the deal via Truth Social, stating that it is “done, subject to final approval [by] President Xi and me”.
He added that China would front-load exports of “magnets and any necessary rare earths”, while the U.S. would resume admitting Chinese students to its universities.
Trump further claimed, “WE ARE GETTING A TOTAL OF 55% TARIFFS, CHINA IS GETTING 10%.”
In fixed income markets, the 10-year Treasury yield declined 1.2% to 4.420%, while the 2-year yield dropped 1.8% to 3.951%.
