Dow Jones Drops 0.34% Amid Geopolitical Tensions, Boeing Crash

On the morning of June 12, U.S. stocks continued to decline, with the Dow Jones Industrial Average falling by 140 points. This downturn was influenced by several key factors, including geopolitical tensions and economic data releases.

The Dow Jones Industrial Average dropped by 143.91 points, or 0.34%, to close at 42,721.86 points. The Nasdaq Composite Index fell by 39.90 points, or 0.20%, to 19,575.98 points, while the S&P 500 Index decreased by 6.01 points, or 0.10%, to 6,016.23 points.

On Wednesday, U.S. stocks ended a three-day winning streak, with the S&P 500 Index and the Nasdaq Composite Index both experiencing slight declines. Despite the drop, the S&P 500 Index remained close to its historical high, only 2% below its peak in late February. This correction followed the release of the May Consumer Price Index (CPI), which showed a lower-than-expected increase.

Scott Wren, a senior global market strategist at Wells Fargo, commented, "I believe the market generally expects inflation to rise slightly. Given the economic slowdown, decelerating earnings growth, and numerous unresolved trade negotiations, there is little reason to push for new highs at this time. I think market volatility or a slight decline is more reasonable."

One of the significant factors contributing to the market's decline was the sharp drop in Boeing's stock price. This was due to a Boeing 787 Dreamliner operated by an Indian airline crashing shortly after takeoff, resulting in the loss of all 242 passengers and crew on board, as well as ground casualties.

Oracle's stock price surged by more than 7% after the company reported better-than-expected fourth-quarter earnings and indicated continued growth in its cloud computing business.

President Trump's threat to impose unilateral tariffs on trading partners within two weeks added to the market's uncertainty. The ongoing trade negotiations, particularly between the U.S. and China, have been a focal point for investors. Recent talks in London between the two countries have been closely watched for any signs of progress.

Economic data released on Thursday showed that the U.S. Producer Price Index (PPI) for May rose by 0.1%, below the expected 0.2% increase. Excluding food and energy, the PPI also rose by 0.1%. Goods prices increased by 0.2%, while service prices rose by 0.1%, reflecting an improvement in wholesale profit margins.

The number of people continuing to claim unemployment benefits in the U.S. reached its highest level since the end of 2021, indicating that job seekers are taking longer to find new employment. The data, released by the U.S. Department of Labor, showed that 1.96 million people were receiving unemployment benefits as of May 31, exceeding all analyst expectations. Meanwhile, the number of first-time unemployment claims remained unchanged, slightly above expectations.

With the latest PPI and unemployment data supporting a rise in bond markets, traders have fully priced in the expectation of two interest rate cuts by the Federal Reserve this year. U.S. Treasury yields fell by 6 to 7 basis points, reaching their lowest levels in a week. This decline reduced expectations for the yield on 30-year bonds, which had previously reached around 4.98%.

Tony Farren, managing director of the rates sales and trading department at Mischler Financial Group, noted, "The inflation data over the past four months has been very, very good. How much longer can the Fed ignore this mild inflation?"

The Federal Reserve is set to hold its fourth monetary policy meeting of the year next week, where it is expected to keep short-term benchmark interest rates unchanged. The Fed will also update its economic projections for the first time since March.

In other news, Nvidia's CEO, Jensen Huang, delivered a keynote speech at the VivaTech conference in Paris, outlining the next phase of AI computing from intelligent systems to AI factories. Huang highlighted that quantum computing is at a turning point and that Nvidia will collaborate with global quantum computing companies. He announced that the quantum algorithm stack can be accelerated on Blackwell 200, leading to a pre-market rally in quantum computing concept stocks.