Stock market today: S&P 500 ends lower as U.S.-China trade deal optimism fades

Investing.com--The S&P 500 closed lower Wednesday, snapping a three-day winning streak despite slowing inflation stoked bets on Federal Reserve rate cuts just as U.S. President Donald Trump confirmed that his administration had struck a trade deal with China.

At 4:00 p.m. ET (20:00 GMT), the Dow Jones Industrial Average dropped 1 point, while the S&P 500 index fell 0.2%, and the NASDAQ Composite fell 0.5%.

U.S., China trade deal "done" - Trump; Middle East tensions flare

The U.S. trade agreement with China is a "done" deal, U.S. Donald Trump said in a social media post, following intense talks over two days in London earlier in the week.

"OUR DEAL WITH CHINA IS DONE, SUBJECT TO FINAL APPROVAL WITH PRESIDENT XI AND ME," Trump said, in a post on his Truth Social site earlier Wednesday, adding that the relationship between the two presidents is "excellent." 

He added that the U.S. will get the access to Chinese rare earth minerals and magnets, which his officials had been pushing for all week, while Chinese students will be allowed to use U.S. colleges and universities.

The U.S. president also noted that U.S. tariffs will total 55% on Chinese goods, while Chinese duties on U.S. goods will be 10%.

Officials from both sides had confirmed that a framework had been agreed upon, but the lack of details had created a degree of uncertainty over what the framework will entail, leaving investors cautious over the potential for future deals, particularly as the previous Geneva agreement dd not hold for long.

On the geopolitical front, the U.S. is preparing to partially evacuate its embassy in Iraq and will allow military dependents to leave locations around the Middle East, Reuters reported, citing unnamed sources. The move was prompted by unspecified security concerns, according to the report. 

The move comes just as the U.S. has threatened to strike Iran should talks over curbing its nuclear programme hit a dead end. 

Inflation slows in May 

U.S. consumer prices rose at a slower-than-anticipated annualized pace in May, even as concerns swirled around the potential impact of Trump’s aggressive tariff agenda on inflation. 

The Labor Department’s consumer price index increased by 2.4% year-over-year last month, accelerating from 2.3% in April but cooler than expectations of 2.5%.

On a monthly basis, the measure eased to 0.1%. Economists had projected that the gauge would match April’s reading of 0.2%.

Stripping out volatile items like fuel and food, so-called "core" CPI equaled April’s rate of 2.8%, while it edged down month-on-month to 0.1%. Both were slower than estimated.

Following the data, short-term interest rate futures priced in a nearly 70% of chance of rate cut in September, up from 57% previously.  

But some on Wall Street remained unconvinced, warning that inflation is likely to pick up pace. 

"Despite the subdued figures, through year-end, we expect YoY core inflation to remain elevated and potentially rise as price pressures flow from recent tariff implementation, Macquarie said in a Wednesday note.

Oracle due to report 

Among the headliners on the earnings front, online pet products retailer Chewy (NYSE:CHWY) stock fell after the online pet products retailer reported net sales in the first quarter that beat estimates, but net income declined and missed Wall Street expectations.

Victoria’s Secret (NYSE:VSCO) stock rose after the lingerie retailer reaffirmed its full-year sales guidance and reported better-than-expected first quarter results, even as it revised its adjusted 2025 operating income forecast lower.

However. a lot of the corporate focus will be on cloud-computing group Oracle (NYSE:ORCL), which is slated to unveil its results after the close of U.S. markets.

In March, Oracle CEO Safra Catz outlined a solid growth trajectory for the business over its next two fiscal years, underpinned by surging demand for cutting-edge artificial intelligence products. Oracle has made AI a pillar of its future strategy, and is pushing to use the nascent technology to help its cloud services process large reams of information.

Cash flow will also be in the spotlight, especially as traders worry over Oracle’s heavy spending plans, analysts at Vital Knowledge said in a note. Wall Street is anticipating free cashflow of roughly $3 billion and capital expenditures of around $3.8 billion.

Peter Nurse, Ambar Warrick contributed to this article