Wall Street stocks pulled back from record highs as flaring tensions in the Middle East and rising crude prices stoked inflation jitters and convinced investors to take some profits.
All three major US stock indexes closed in negative territory on Wednesday, dragged lower by financials and tech, with the small-cap Russell 2000 underperforming its larger-cap counterparts.
Chips gained 1.4 per cent, indicating the artificial intelligence fervour is alive and well. Even so, six of the Magnificent Seven group of AI-related megacaps ended lower. Meta Platforms was the sole gainer, rising 4.2 per cent.
The S&P Software & Services index, battered in recent months by fears of AI disruption, slid four per cent.
Middle East hostilities intensified as the US and Iran traded a new round of air strikes, the latest test of a shaky ceasefire.
Oil prices rose, adding to worries that upward pressure on energy prices could metastasise into broader, systemic inflation.
In fact, financial markets are pricing in a 41.1 per cent likelihood of a rate hike at the conclusion of the US Federal Reserve's December meeting, up from 9.1 per cent one month ago, according to CME's FedWatch tool.
Economic data suggested the labour market was stable, and the services sector continued to expand, butinput prices remained elevated and corporate spending plans appeared soft amid rising energy costs and geopolitical uncertainties.
The Beige Book, the Fed's regional economic survey, showed economic activity gathered steam in recent weeks, employment was little changed, but the fallout from higher energy prices due to the war was pervasive.
The Dow Jones Industrial Average fell 620.72 points, or 1.21 per cent, to 50,687.07, the S&P 500 lost 56.06 points, or 0.74 per cent, to 7,553.72 and the Nasdaq Composite lost 239.92 points, or 0.89 per cent, to 26,853.98.
Of the 11 major sectors of the S&P 500, tech and financials fell the most. Energy stocks, buoyed by oil prices, enjoyed the largest percentage gains.
Broadcom fell 4.5 per cent in extended trading after reporting results.
Declining issues outnumbered advancers by a 3.04-to-1 ratio on the NYSE. There were 291 new highs and 187 new lows on the NYSE.
On the Nasdaq, 1,351 stocks rose and 3,498 fell as declining issues outnumbered advancers by a 2.59-to-1 ratio.
The S&P 500 posted 33 new 52-week highs and 19 new lows while the Nasdaq Composite recorded 90 new highsand 137 new lows.
Volume on US exchanges was 19.81 billion shares, compared with the 20.12 billion average for the full session over the last 20 trading days.
