Stocks opened lower Wednesday and stayed there through the close as geopolitical worries ramped up after the U.S. launched strikes against Iran late Tuesday and President Donald Trump threatened more attacks. Another red-hot inflation reading weighed on sentiment, too.
President Trump kept to his word. After saying on Tuesday that the U.S. “must, of necessity, respond” to the shooting down of an Army Apache helicopter, the military launched multiple strikes against Iranian targets last night.
And in an early morning Truth Social post, Trump criticized Iran, saying it has “taken too long to negotiate a deal,” and “will have to pay the price.” Speaking to reporters in the Oval Office later in the day, Trump said that “we’re going to be attacking them” and “we’re going to hit them again hard today.”
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The news sent oil prices soaring today, with front-month West Texas Intermediate crude futures climbing 2.1% to $90.03 per barrel.
The stock market, on the other hand, finished the day in negative territory. At the close, the blue-chip Dow Jones Industrial Average was down 1.9% at 49,918, the broader S&P 500 was off 1.6% at 7,266, and the tech-heavy Nasdaq Composite was 2.0% lower at 25,169.
Higher energy prices keep inflation hot
While oil prices have pulled back from their early April highs near $113 per barrel, they’re still up more than 35% since the war in Iran began in late February. And this has had a noticeable impact on inflation.
According to the Bureau of Labor Statistics (BLS), headline inflation was up 0.5% from April to May and 4.2% higher than the year prior. While the monthly increase decelerated from April’s 0.6%, the annual rise was up from 3.8% the month prior and marked the highest yearly pace since April 2023.
Energy costs had the biggest impact on the May CPI report. “The index for energy rose 3.9 percent in May, after rising 3.8 percent in April and 10.9 percent in March. The energy index accounted for over sixty percent of the monthly all items increase,” wrote the BLS in its report.
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Core CPI, which excludes volatile food and energy prices, rose 0.2% month over month and 2.9% year over year. This compares to April’s increases of 0.4% and 2.8%, respectively.
Ahead of next week’s Federal Reserve meeting — the first with Kevin Warsh at the helm — many are wondering if higher inflation readings mean the central bank’s next move will be a rate hike.
But Skyler Weinand, chief investment officer at Regan Capital, doesn’t see that happening any time soon. “It’s clear that rate cuts are off the table, and while there is chatter about a potential rate hike, we believe it’s unlikely that we’ll see a rate hike before the midterm elections, and any such hike is likely a year away,” he says.
Nike gets downgraded ahead of earnings
Two-thirds of Dow Jones stocks closed lower today, and Nike (NKE, -1.5%) was one of them. This came after RBC Capital analyst Piral Dadhania downgraded the blue chip stock to Sector Perform from Outperform, the equivalents of Hold and Buy, respectively.
The analyst says that Nike’s turnaround efforts under CEO Elliott Hill are “making progress,” but at a “slower and narrower” pace than anticipated. He also does not expect the World Cup or inventory cleanup to create any sustainable revenue boosts this year.
In addition, Dadhania lowered his price target on NKE to $50 from $70, though this is hardly the lowest on Wall Street. That distinction goes to BNP Paribas Exane’s $23 target price for Nike, representing implied downside of nearly 50% to current levels.
The athletic apparel and footwear maker is slated to disclose its fiscal fourth-quarter results after the June 30 close. Analysts expect earnings to rise roughly 16% year over year, but revenue to decline by about 2%.
Casey’s climbs 20% in a down day
Elsewhere on Wall Street, Casey’s General Stores (CASY) surged 20.3% — making it the best S&P 500 stock today — after the convenience store chain said fiscal fourth-quarter earnings rose 66% year over year and revenue was 14.5% higher.
The company also said its board of directors approved a 14% hike to its quarterly dividend earlier this month, marking the 27th consecutive year it has increased its payout.
“Casey’s reported an exceptionally strong fiscal fourth quarter,” says William Blair analyst Phillip Blee, with the company seeing a “nice tailwind” from spiking gas prices. He expects “a series of beat-and-raise prints throughout the upcoming fiscal year,” given strong sales both inside the store and at the gas pumps.
Casey’s General Stores was added to the S&P 500 Index in early April, replacing the now-private Hologic. Since then, its share price is up more than 22%.
