Stocks closed lower on Wednesday as investors reacted to hotter-than-expected inflation data, continued weakness in technology shares, and rising geopolitical tensions in the Middle East.

The S&P 500 Index (SPY  ) fell 119.66 points, or 1.62%, to close at 7,266.99. The Dow Jones Industrial Average (DIA  ) dropped 953.33 points, or 1.87%, while the Nasdaq Composite (QQQ  ) declined 509.32 points, or 1.98%, as losses in semiconductor and AI-related stocks weighed heavily on the broader market.

Technology shares continued their recent pullback, with semiconductor stocks leading declines throughout the session. Investors continued rotating out of some of the market's biggest AI winners following months of strong gains, while concerns surrounding elevated valuations and future interest rate policy added additional pressure to growth-oriented sectors.

Markets were also impacted by rising geopolitical tensions involving Iran, which pushed oil prices higher and reignited concerns surrounding inflation and global economic stability. Energy prices moved sharply upward during the trading session as investors monitored developments in the Middle East.

Among notable movers, Super Micro Computer (SMCI  ) fell after announcing plans for a $7 billion capital raise. Transportation and logistics stocks also moved lower after Amazon (AMZN  ) continued expanding its freight and shipping operations, increasing competitive pressure across the sector. Oracle (ORCL  ) was closely watched ahead of its earnings release after the closing bell as investors looked for additional insight into enterprise AI and cloud demand trends.

On the economic front, investors digested the latest Consumer Price Index (CPI) report, which showed inflation rising 4.2% year-over-year in May, marking the highest annual reading since 2023. Energy prices were a major contributor to the increase, though core monthly inflation came in relatively moderate. The report reinforced expectations that the Federal Reserve may keep interest rates elevated for longer than previously anticipated.

Treasury yields moved higher following the inflation data release, while traders continued reassessing expectations for potential Federal Reserve rate cuts later this year.

Investors will continue monitoring inflation trends, upcoming economic reports, corporate earnings, and geopolitical developments as markets look for direction following recent volatility.