The Dow Jones Industrial Average managed a modest gain Wednesday, but the broader market struggled as semiconductor stocks reversed course after a strong bounce the prior day. The Nasdaq Composite was up just 0.28% by midday, fading from an early 0.8% high, while the S&P 500 added only 0.1%. The Dow outperformed with a 0.3% rise, though it too pulled back from a morning peak above 0.5%.
Inflation Relief Fades as Chip Rout Returns
Markets opened on a high note after the Bureau of Labor Statistics reported that wholesale prices fell 0.3% in June, the first monthly decline since August 2025 and a surprise against expectations of flat reading. Coming a day after a cooler-than-expected consumer price index, the data fueled hopes that inflation is finally easing. New York Fed President John Williams added to the optimism, saying there are "encouraging reasons to expect that inflation has peaked." Traders responded by slashing the probability of a July rate hike from 42% to just 17%.
But the good mood evaporated as semiconductor stocks plunged again. SK Hynix cratered 13.2%, giving back most of Tuesday's 18.5% surge, and Micron Technology tumbled 9.4% on fears of rising competition from Chinese memory chips. Nvidia slipped 2.2% and AMD dropped 6.4%. The whiplash has been brutal: Monday was a chip rout, Tuesday a bounce, Wednesday another selloff.
Mega-Cap Tech Offsets, Insurers Slide
Caterpillar fell 4.2%, the Dow's worst performer, dragged down by its exposure to data center construction demand that has made it an unlikely AI trade. Health insurers also struggled: Elevance Health dropped 10.8% despite beating earnings estimates, as slim margins spooked investors. Other insurers followed lower.
Mega-cap technology stocks provided a counterweight. Apple popped 4.1% on reports it is shopping for AI chip startups. Alphabet gained 3.7%, Microsoft rose 3.4%, and Amazon added 3.4%. Meanwhile, oil prices crept higher as U.S.-Iran tensions showed no signs of cooling, with analysts warning the conflict could become a "forever war."
Volatility Creates Opportunity
Warren Buffett offered his assessment in a CNBC interview: "It's tough to find values when everybody is preferring gambling." For long-term investors, the message is familiar: volatility creates opportunity, but patience remains essential. The inflation data suggests the Fed may have more flexibility than feared, even as rate hikes remain on the table for later this year. That's worth remembering the next time a semiconductor headline sends indexes spinning.