Wall Street ended down slightly on Wednesday, with bank stocks declining as prospects of a US interest rate cut rose and energy shares tumbling along with oil prices. The S&P 500 energy index slid 1.4%, the most among the 11 S&P sectors, as demand worries drove US crude prices down 4%. The day's losses made energy the worst-performing S&P 500 sector for the year-to-date.
A report from the Labor Department showed US consumer prices rose 0.1% in May, in line with expectations of economists polled by Reuters, pointing to moderate inflation. This backed the case for a rate cut by the Federal Reserve.
Banking stocks, which tend to benefit from higher interest rates, dropped 1.4%. The broader financial sector fell 1%.
Still, hopes that the Fed will act to counter a slowing global economy due to the escalating trade war with China have spurred a rally in stocks this month. The S&P 500 index is up 4.6% so far in June.
Fed policymakers will meet on June 18-19. Markets have priced in at least two rate cuts by the end of 2019. Fed fund futures imply around an 80% chance of an easing in rates as soon as July.
Investors are reducing exposure to stocks after the recent rally and as they brace for the Fed meeting.
"People don't want to be too far over their skis going into next week," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
The Dow Jones Industrial Average fell 43.68 points, or 0.17%, to 26,004.83, the S&P 500 lost 5.88 points, or 0.20%, to 2,879.84 and the Nasdaq Composite dropped 29.85 points, or 0.38%, to 7,792.72.
S&P 500 utilities, which are positively affected by falling rates, was the day's best-performing sector, rising 1.3%.
Lingering worries on the trade front weighed on sentiment, a day after President Donald Trump said he was holding up a deal with China and had no interest in moving ahead unless Beijing agrees to four or five major points.
Less than three weeks before proposed talks between the United States and Chinese leaders, sources say there has been little preparation. Trump said a deal could be reached, but again threatened to increase tariffs on Chinese goods unless that happens.
Semiconductor stocks, which get sizeable revenue from China, declined on Wednesday. The Philadelphia Semiconductor index
dropped 2.3%. Micron Technology Inc, Applied Materials Inc and Lam Research Corp dropped more than 5% each.
Facebook Inc shares declined 1.7% after the Wall Street Journal reported the social media giant uncovered emails possibly connecting Chief Executive Officer Mark Zuckerberg to potentially problematic privacy practices.
Declining issues outnumbered advancing ones on the NYSE by a 1.20-to-1 ratio; on Nasdaq, a 1.07-to-1 ratio favored decliners.
The S&P 500 posted 24 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 41 new highs and 104 new lows.
Volume on US exchanges was 5.98 billion shares, compared to the 6.88 billion average for the full session over the last 20 trading days.
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