Wall Street delivered a split verdict on Tuesday, with the Dow Jones Industrial Average eking out a modest gain while the Nasdaq 100 slid nearly 1%, as a hotter-than-expected April inflation report and escalating Middle East tensions weighed on technology shares but boosted defensive health insurance stocks.
The S&P 500 Index ($SPX) slipped 0.16%, the Dow Jones Industrial Average ($DOWI) rose 0.11%, and the Nasdaq 100 Index ($IUXX) fell 0.87%. June E-mini S&P futures (ESM26) dropped 0.16%, while June E-mini Nasdaq futures (NQM26) declined 0.90%.
Also read: Crude Oil Surges as Trump Signals Prolonged Strait of Hormuz Closure
Inflation Data Surprises to the Upside
The April Consumer Price Index (CPI) rose 3.8% year-over-year, exceeding the 3.7% consensus estimate and marking the largest annual increase in nearly three years. Core CPI, which excludes volatile food and energy prices, climbed 2.8% year-over-year, also above the 2.7% forecast and representing the steepest six-month rise. The data reinforced concerns that inflation remains stubbornly elevated, reducing the likelihood of near-term Federal Reserve rate cuts.
Chicago Federal Reserve President Austan Goolsbee described services inflation as the worst part of the April report, stating that “the Fed has got to be thinking about how do we break the chain of escalating inflation.” Markets now price in only a 4% chance of a quarter-point rate cut at the Federal Open Market Committee’s June 16-17 meeting.
Also read: Corn Holds Gains After USDA Report: What the May WASDE Means for Prices and Planting
Middle East Tensions Keep Oil Elevated
Geopolitical risk added to market uncertainty after President Trump characterized Iran’s response to his peace proposal as a “piece of garbage” and said the current ceasefire in the region is on “life support.” WTI crude oil prices surged more than 4% on Tuesday, as the Strait of Hormuz remains effectively closed. Goldman Sachs estimates the disruption has drawn down nearly 500 million barrels from global crude stockpiles, with the drawdown potentially reaching 1 billion barrels by June.
The 10-year Treasury note yield rose 5 basis points to 4.46%, reflecting both higher inflation expectations and the oil price spike. T-notes also faced pressure from a weaker-than-expected $42 billion 10-year note auction, which had a bid-to-cover ratio of 2.40, below the 10-auction average of 2.49.
Tech and Chip Stocks Retreat
Technology shares led the decline, giving back some of Monday’s sharp gains that had pushed the S&P 500 and Nasdaq 100 to record highs. Chipmakers were particularly weak: Qualcomm (QCOM) fell more than 11%, Intel (INTC) dropped over 6%, and Sandisk (SNDK), Western Digital (WDC), Micron Technology (MU), Marvell Technology (MRVL), and NXP Semiconductors (NXPI) all lost more than 3%. Applied Materials (AMAT), Advanced Micro Devices (AMD), ASML Holding (ASML), and Broadcom (AVGO) each declined more than 2%.
Software stocks also struggled. Salesforce (CRM) fell more than 3%, leading Dow losers, while Oracle (ORCL), ServiceNow (NOW), Adobe (ADBE), and Atlassian (TEAM) dropped more than 2%. Microsoft (MSFT), Intuit (INTU), Datadog (DDOG), and Workday (WDAY) each lost over 1%.
Health Insurance Stocks Rally as Defensive Play
Defensive health insurance names provided a counterweight to tech weakness. Humana (HUM) surged more than 7%, Centene (CNC) added over 5%, and UnitedHealth Group (UNH) rose more than 3% to lead Dow gainers. Elevance Health (ELV), Universal Health Services (UHS), CVS Health (CVS), Cigna Group (CI), and Molina Healthcare (MOH) all gained more than 3%.
Earnings Season Remains Supportive
Despite the mixed session, the broader earnings picture remains positive. Of the 454 S&P 500 companies that have reported first-quarter results, 83% have beaten analyst estimates. Aggregate Q1 earnings are projected to climb 12% year-over-year, according to Bloomberg Intelligence. However, stripping out the technology sector, earnings growth slows to approximately 3%, the weakest in two years.
Notable individual movers included PACS Group (PACS), which jumped more than 29% after raising its full-year EBITDA forecast, and Wendy’s (WEN), which rose more than 17% following reports of a potential take-private bid from Trian Fund Management. Zebra Technologies (ZBRA) gained more than 11% after beating Q1 estimates and raising guidance. On the downside, Power Solutions International (PSIX) cratered more than 38% after a significant revenue miss, and Hims & Hers Health (HIMS) dropped more than 13% on weaker-than-expected revenue and cautious guidance.
Conclusion
Tuesday’s session reflected a market grappling with competing forces: resilient corporate earnings and defensive sector strength on one hand, and sticky inflation, elevated interest rates, and geopolitical uncertainty on the other. The divergence between the Dow’s modest gain and the Nasdaq’s decline underscores the rotation away from high-growth tech into more defensive positioning. With the Fed unlikely to cut rates in the near term and oil prices remaining volatile, investors may continue to favor sectors less sensitive to rising input costs and borrowing expenses.
FAQs
Q1: Why did stocks end mixed on Tuesday?
Stocks ended mixed because a hotter-than-expected April CPI report and rising Middle East tensions weighed on technology and chip stocks, while defensive sectors like health insurance rallied, providing support to the Dow Jones Industrial Average.
Q2: How did the April CPI report affect market expectations for Fed rate cuts?
The April CPI came in above forecasts at 3.8% year-over-year, reducing the probability of a rate cut at the June FOMC meeting to just 4%. Higher inflation typically reduces the urgency for the Fed to lower interest rates.
Q3: What impact are Middle East tensions having on oil prices and the broader market?
Continued closure of the Strait of Hormuz has driven WTI crude oil prices up more than 4%, raising inflation expectations and bond yields. This geopolitical uncertainty is weighing on overall market sentiment, particularly for growth and tech stocks sensitive to higher input costs.
