Markets Pare Losses Early on Lukewarm CPI Data

Published as of: June 10, 2026, 9:13 a.m. ET

(Wednesday market open) Eagerly awaited May Consumer Price Index (CPI) data arrived mostly as expected, with headline prices up 0.5% last month and core CPI, which excludes energy and food, up 0.2%. Expectations were 0.5% for headline inflation and 0.3% for core, and the numbers reinforced ideas the Federal Reserve will likely stay on hold for now. Treasury yields retreated and stocks pared earlier losses in the immediate aftermath of the report, but the market remained red as Middle East tension mounted. 

"Inflation was hot but not as hot as expected," said Cooper Howard, director of fixed income research and strategy at the Schwab Center for Financial Research (SCFR). "A bright spot—if you can call it that when year-over-year inflation is above 4%—is that it wasn't a surprise to the upside. The story continues to be that it's energy led. Headline annual CPI was up 4.2% but core was up 2.9%."

The S&P 500 Index fell Tuesday but closed well off its lows, staging a furious rally starting around midday after dropping by as much as 2% and approaching its 50-day moving average. Chip stocks got hammered again, more than wiping out gains achieved during Monday's rebound. With growing anxiety over the AI trade, some investors may be looking to lock in profits or perhaps free up capital ahead of initial public offerings ahead. New tit-for-tat military strikes sparked mounting tension early today, threatening the tenuous ceasefire and sending crude oil prices higher. Software giant Oracle (ORCL) reports after the close.

1. CPI deeper dive: The 4.2% rise in headline CPI year-over-year today matched analysts' consensus and was the highest since April 2023. Still, even after the data, futures trading indicated a 98.2% chance that the Fed keeps its target range between 3.5% and 3.75% at next week's meeting, staying parked right where it's been since the most recent rate cut last December. The market doesn't build in 50% odds of a rate hike until this December's meeting, when chances are nearly 70% for at least a 25-basis point increase, according to the CME FedWatch Tool. "We expect the Fed to remain on hold for the time being," Howard said, adding today's data has no near-term Fed implications. Checking under the hood, May CPI showed goods prices flat but a 0.3% gain in services. Gas prices charged 40.5% higher year over year, accelerating from April's 28.5% gain. The energy index surged 3.9% monthly in May, accounting for over 60% of the total monthly increase, continuing the oil shock that pushed energy up 3.8% in April and 10.9% in March. Shelter remains sticky at 0.3% monthly but did get a downtick from April's 0.6% rise. Monthly headline and core CPI rose less than in April.
    
2. Producer prices ahead: May's Producer Price Index (PPI), due at 8:30 a.m. ET tomorrow, is expected to show monthly headline and core gains of 0.7% and 0.4%, respectively, according to Briefing.com. That's a slower pace of gains than April's 1.4% and 1% and may reflect the relative flattening of U.S. gasoline prices in May compared with April. Any data topping those estimates could drag major indexes. Recent wholesale price data shows mounting pressure—not just from higher oil prices—which suggests inflation could be building upstream from consumer prices. PPI gains often lead to higher consumer prices in the months that follow as companies pass along heavier costs. Also, PPI could be influenced by front-loading of products as wholesalers scrambled to build supply trying to get ahead of inflation. This would tend to raise demand, and in turn lead to higher prices.
    
3. AI costs assessed: Last year, Uber Technologies (UBER) realized it'd underestimated the impact AI tools could have on the business, executives told analysts during a recent earnings call. They soon decided to raise spending. It's becoming a more common story. Rising costs for Uber and many other companies are putting another spotlight on AI, particularly big firms like OpenAI and Anthropic. Much of the heavy spending is for high-level systems from those firms that are expensive to implement. This could leave space for competitors offering lower-cost AI for simpler applications, CNBC noted last week. One beneficiary could be China's DeepSeek, which lacks access to complex Nvidia (NVDA) AI chips but can offer many AI tools companies might find useful for simpler needs, like managing delivery schedules or less complex data.

• Tech stocks, especially the chip sector, remained under pressure early today. The worst early performer was Super Micro Computer (SMCI), down more than 12% after the company announced a proposed $7 billion equity financing package to help handle rising AI orders.
   
• The chips were down again this morning, with weakness hitting memory and AI chip makers equally hard. Arm Holdings (ARM) fell 4.6% and Micron (MU) dropped 4.3%, while Advanced Micro Devices (AMD) lost nearly 4%.
   
• Today's early chip sector losses pushed the PHLX Semiconductor Index (SOX) to levels more than 10% below last Wednesday's all-time high close. SOX settled at 12,657 yesterday after falling below 12,000 intraday. Technical support might be at last Friday's close of 12,220.
   
• Taiwan Semiconductor Manufacturing (TSM) fell 3% early today with the rest of the chip sector despite reporting that May revenue rose 30.1% year over year.
   
• Oracle (ORCL) lost more than 3% ahead of earnings later today from the software giant. Capital spending plans are likely to take center stage as investors monitor demand following Broadcom's slightly disappointing guidance last week that contributed to Friday's chip selloff. Oracle's capital expenditures are likely to rise 30% year over year, Barron's said, citing Wall Street analysts.
   
• Casey's General Stores (CASY) climbed 1% early after earnings per share easily beat analysts' consensus and revenues also topped estimates. The company also authorized a $1 billion share repurchase program and raised its dividend.
   
• Nike (NKE) dropped 1.8% early today after getting a downgrade by RBC Capital to sector perform from outperform. The company's turnaround has been slower and narrower than expected, the analyst said.
   
• Chewy (CHWY) rolled up 4% early gains on quarterly earnings that topped consensus views and better-than-expected second quarter earnings per share guidance. The company also expects less revenue this quarter and for the full year than analysts had forecast.
   
• Biotech firm Illumina (ILMN) shares jumped more than 3.7% early today after JPMorgan Chase upgraded the stock to outperform from neutral, citing satisfied customers.
   
• Energy sector stocks were among the few parts of the market looking green early today, with a nearly 2% rise for Baker Hughes (BKR) and Valero Energy (VLO) up almost 1% amid rising oil and Gulf tensions.
   
• Gold (/GC) fell more than 2.5% early Wednesday to an 11-week low below $4,200 per ounce. Strength in the dollar has weighed on the gold metal. The dollar index ($DXY) topped 100 early today amid rising Middle East tensions.
   
• Despite the drop in major indexes Tuesday, nine of 11 S&P 500 sectors ended the day green. Real estate and materials led the pack, while info tech plunged amid a renewed rotation out of chipmakers. Breadth remained relatively strong despite volatility, with roughly 58% of S&P 500 stocks trading above their 50-day moving average.
   
• Treasury yields fell across most of the curve Tuesday even as a 3-year note auction was met with lukewarm demand. Investors will closely monitor today's 10-year note auction. Further signs of weak demand might put pressure on Treasuries and raise yields.

Millennial mirth: Investors born between 1981 and 1996 shook off geopolitical and inflationary concerns last month, topping all other generations represented at Schwab to achieve the highest STAX score in May. Learn more in our latest generational trends review.  

Trading According to GARP: One trading strategy offers to blend the principles of value investing with the goals of growth investing. Its name? Growth at a reasonable price, or GARP. Our new trading video explains what to look for and how to find it using the Stock Screener tool on Schwab.com.

The U.S. Dollar Index ($DXY—candlesticks) briefly topped 100 on Monday for the first time since April 7 and closed just below 100 Tuesday. The recent gains could reflect solid U.S. economic data, including last week's jobs report, that seems to limit the chances of any near-term rate cuts by the Fed. The dollar also draws support from the uncertain geopolitical situation that tends to cause a flight to perceived safety, though no investment is safe. The dollar has spent most of the last year in a tight range between 95 and 100, and has been trading above its 50-day moving average (blue line).

June 11: ECB interest rate decision, May PPI and core PPI, and expected earnings from Adobe (ADBE) and Lennar (LEN).
June 12: University of Michigan June preliminary consumer sentiment.
June 15: May industrial production.
June 16: Start of FOMC meeting, May housing starts and building permits.
June 17: FOMC rate decision and expected earnings from Carmax (KMX).