Wall Street Rally Halted by Oil and Service Price Warnings

On the 3rd, local time in the U.S., New York’s major stock indexes all closed lower, bringing an end to their record-high streak. The S&P 500 fell 0.7%, snapping a nine-session rally, while the Dow Jones Industrial Average dropped 1.2% and the Nasdaq slid 0.9%. Geopolitical concerns—renewed U.S.–Iran tensions in the Middle East and a drone attack at Kuwait’s airport—drove Brent crude up 1.9% to $97.81 a barrel, weighing on investor sentiment.

Economic data heightened worries about rekindled inflation rather than a growth slowdown. ADP reported 122,000 private-sector jobs added in May, topping forecasts of 118,000, and the ISM Services PMI came in at 54.5, above both the prior month’s reading and consensus. Meanwhile, the ISM’s services price index surged into the 70s, underscoring persistent price pressures. As a result, the 10-year U.S. Treasury yield ticked up into the mid-4% range, further reducing expectations for an early Federal Reserve rate cut.

In corporate news, cybersecurity firm Palo Alto Networks fell over 5% despite better-than-expected results, as overheated market expectations weighed on its stock. In contrast, GameStop jumped roughly 9% after announcing a restructuring plan and a share buyback. Overall, the sharp rise in oil and strong service-sector inflation refocused markets on “inflation risks over growth concerns.” While short-term volatility has increased, the market’s next move will hinge on Friday’s employment report and oil price trends, making it essential for investors to monitor both the Fed’s rate path and developments in the energy sector.