Major Wall Street indexes declined on Wednesday as technology shares extended their losses, while renewed tensions between the United States and Iran overshadowed the impact of US inflation data that largely matched market expectations.

By 9:37 a.m. New York time, the Dow Jones Industrial Average had fallen 285.36 points, or 0.56%, to 50,586.75. The SP 500 dropped 33.44 points, or 0.45%, to 7,353.21, while the Nasdaq Composite lost 147.78 points, or 0.57%, to 25,531.04.

Financial markets have experienced increased volatility in recent days as investors navigate a growing list of risks, including elevated technology stock valuations, escalating geopolitical tensions in the Middle East, and expectations that the Federal Reserve may be forced to raise interest rates to contain inflation.

The CBOE Volatility Index (VIX), often referred to as Wall Streets fear gauge, rose 0.78 points to 20.65 after reaching its highest level since April 7 in the previous session.

Inflation and rate concerns weigh on AI and technology stocks

Economic data showed that US consumer prices rose 4.2% over the twelve months through May, marking the largest annual increase since April 2023. The rise was driven largely by higher gasoline and energy prices linked to the Middle East conflict.

However, the figures were broadly in line with economists expectations.

Art Hogan, Chief Market Strategist at B. Riley Wealth, said the inflation report matched forecasts but continued to move in a direction that remains uncomfortable for both investors and policymakers.

He added that the report did not materially alter expectations for the upcoming Federal Reserve meeting, with consensus still pointing to no change in interest rates for now.

Markets widely expect the Fed to keep rates unchanged at its June meeting, although investors continue to price in at least one 25-basis-point rate increase before year-end.

Heavy losses for semiconductor and AI stocks

Technology and artificial intelligence stocks remained the hardest hit as investors adjusted to the possibility of tighter monetary policy and growing concerns about stretched valuations across the sector.

Shares of Nvidia, Broadcom, and Micron Technology fell between 1% and 3.8%, resuming their decline after a brief rebound on Monday.

The SP 500 technology sector also slipped 1.1%.

Super Micro Computer plunged 14.2% after announcing plans to raise $7 billion through equity offerings and related financing transactions to fund component purchases needed to meet growing demand for AI servers.

Meanwhile, profit-taking in high-performing technology names helped support sectors that have lagged the market this year, including healthcare, real estate, and consumer staples.

Six of the eleven major SP 500 sectors traded higher, with the energy sector leading gains as oil prices climbed more than 1%.

US President Donald Trump said Iran had taken too long to negotiate an agreement and would now pay the price, while Tehran announced it would reassess its diplomatic approach toward Washington following overnight military exchanges.

Investors also view the highly anticipated IPO of SpaceX on Fridaytargeting a valuation of $1.75 trillion and seeking to raise $75 billionas a potential source of additional pressure on US equities amid growing concerns about excessive optimism in the technology sector.

In other stock movements, trucking companies including XPO, J.B. Hunt, and Old Dominion fell between 2.5% and 6.2% after Amazon announced an expansion of its less-than-truckload shipping services across the United States.

As a result, the industrial sector declined 1%.

Market breadth was negative overall, with declining stocks outnumbering advancing issues by 1.17-to-1 on the New York Stock Exchange and by 1.05-to-1 on the Nasdaq.

Within the SP 500, 13 stocks reached new 52-week highs while four hit new lows. On the Nasdaq, 35 stocks posted new highs and 71 registered new lows.