Markets Decline Amid Geopolitical Risks and Profit-Taking
Market News 21 JUN
On Wednesday, U.S. stock indices showed a corrective decline after an initial rise, reflecting a combination of domestic and external factors that increased market uncertainty.
One of the key drivers of investor sentiment was the escalation of geopolitical tensions in the Middle East. Reports that the U.S. embassy in Iraq was preparing for evacuation fueled concerns as negotiations between the U.S. and Iran over its nuclear program reached a stalemate. President Trump noted reduced confidence in reaching an agreement, increasing speculation that Israel may resort to military action against Iran's nuclear facilities.
Inflation Slows, But Risks Remain
Early market optimism was fueled by May's Consumer Price Index (CPI) data. Annual inflation stood at 2.4%, and core inflation at 2.8%, slightly below expectations. This eased fears of further tightening by the Federal Reserve. As a result, the yield on 10-year U.S. Treasuries dropped by 5 basis points to 4.41%.
However, later in the session, investors began taking profits, leading to a market reversal. The S&P 500 and Nasdaq closed down 0.3% and 0.5%, respectively, while the Dow Jones managed to stay in positive territory, gaining 0.2%.
Trade Developments
Trade talks between the U.S. and China led to preliminary agreements. China agreed to increase rare earth metal exports in exchange for easing U.S. visa policies for Chinese students. Meanwhile, the U.S. maintained its 55% tariffs on Chinese imports, confirmed by a recent appellate court decision.
Corporate Highlights
The day was rich in corporate news, significantly influencing individual stock movements:
Tesla announced the launch of its robotaxi service in Austin on June 22 with a limited fleet of Model Y vehicles.
General Motors revealed a $4 billion investment to modernize its U.S. plants.
Papa John’s jumped 11.5% on reports of a potential acquisition by Apollo Global and a Qatari investment fund.
Walgreens Boots Alliance expressed interest in Rite Aid’s assets amid bankruptcy proceedings.
GitLab dropped 10% after issuing a conservative revenue forecast.
Vaxart surged 37% following positive trial results for its new norovirus vaccine.
Ouster rose 21% after receiving Department of Defense approval for its lidar technology in UAVs.
Chewy fell 11% due to a lower-than-expected gross margin in Q1.
Sector Movements
Specific sectors saw particularly sharp moves:
Semiconductors were under pressure: Intel dropped over 6%, ON Semiconductor 3%, GlobalFoundries 2%, with AMD, Texas Instruments, and Marvell also posting losses.
Steel producers declined after the U.S. and Mexico reached a deal to lift tariffs on certain steel imports. Cleveland-Cliffs fell 8%, Nucor 6%.
Airlines dropped as crude oil prices hit a 2.5-month high, raising concerns over fuel costs. United Airlines and American Airlines fell over 5%, Delta 4%, Alaska Air and Southwest more than 2%.
Energy stocks strengthened, benefiting from oil’s sharp rise. Devon Energy, ConocoPhillips, Occidental Petroleum, and ExxonMobil all closed higher.
Defense stocks faced headwinds: Lockheed Martin declined 4% after the U.S. Air Force halved its F-35 procurement request.
International Markets and Bonds
Global markets showed mixed performance: Europe’s Euro Stoxx 50 declined by 0.41%, while China’s Shanghai Composite rose 0.52%, and Japan’s Nikkei added 0.55%.
In the bond market, U.S. 10-year Treasuries rebounded on the soft inflation data, with yields falling to 4.412%. Inflation expectations dipped to a one-month low of 2.275%.
The market remains highly sensitive to geopolitical events and corporate earnings. Investors took profits amid mildly encouraging inflation data but remain cautious given ongoing global instability and uncertainty over the Federal Reserve’s next moves.
In the coming days, focus will shift to new data on jobless claims, producer prices, and consumer sentiment.