After several days of upward momentum, U.S. equity markets took a breather on Wednesday as investors assessed lower-than-expected inflation data and the prospects of a preliminary trade agreement between the United States and China. While recent gains had lifted optimism, the market showed signs of short-term exhaustion, closing near previous levels amid cautious sentiment.
Inflation Surprise Dampens Rally
The S&P 500 slipped by 0.27% to finish at 6,022.24, snapping a three-day winning streak. The tech-heavy Nasdaq Composite declined 0.5% to close at 19,615.88, while the Dow Jones Industrial Average remained almost flat, losing just 1.1 points to settle at 42,865.77.
New data released by the U.S. Bureau of Labor Statistics showed that the Consumer Price Index (CPI) rose only 0.1% in May compared to April, below the 0.2% increase expected by economists. Core inflation, which excludes volatile food and energy prices, posted a similarly modest rise.
According to Alexandra Wilson-Elizondo of Goldman Sachs, “The weaker-than-expected CPI data suggests current tariffs haven’t yet exerted a major inflationary impact, likely because companies are relying on existing inventory or adjusting prices cautiously amid demand uncertainty.”
Tentative US-China Deal Faces Geopolitical Challenges
Negotiations between U.S. and Chinese officials in London have led to a draft agreement that could ease tensions between the two nations. Under the proposal, China would allow the export of rare earth minerals, while the U.S. would scale back certain restrictions on high-tech exports.
However, the deal’s implementation hinges on final approval from both Presidents. U.S. Commerce Secretary confirmed that current tariffs on Chinese goods would remain unchanged for now. Former President Trump, in a post on Truth Social, claimed that the agreement includes upfront delivery of rare earths by China in exchange for eased student visa access and that the U.S. has secured a 55% tariff advantage compared to China’s 10%.
Despite the progress, geopolitical uncertainties and the complexity of trade policy enforcement continue to weigh on investor confidence.
Dow Jones Analysis – June 12, 2025
The Dow Jones Index has been in a strong uptrend, repeatedly bouncing off an ascending trendline (shown in purple on the chart). However, in recent sessions, that trendline was broken to the downside, potentially signaling a short-term shift in market structure.
Key Supply and Demand Zones:
Demand (Support) Zone: 42,350 – 42,500
This area previously triggered a sharp rebound and could once again act as a key support. It’s also the most logical first target for short sellers.
Supply (Resistance) Zone: 43,000 – 43,100
Price has faced selling pressure multiple times upon testing this area. A breakout would require significant buying volume and possibly a supportive fundamental catalyst.
Possible Scenarios:
Bearish Continuation:
If the price confirms below the broken trendline and takes out nearby support, the next key target lies within the 42,350–42,400 zone. A break of the previous swing low would add further confirmation.
Bullish Reversal:
Should the price reclaim and hold above the trendline, the 43,000 resistance zone will come into focus again. A breakout above this level would suggest renewed bullish strength and may depend on improving macro data or a finalized trade agreement.
Final Thoughts
Markets are navigating a complex landscape of mixed inflation signals and fragile geopolitical negotiations. While the recent CPI data eases some inflation concerns, the uncertainty surrounding U.S.-China trade relations continues to cast a shadow. Investors should watch key technical levels closely, especially as short-term momentum stalls and market participants reassess risk sentiment heading into the next round of economic releases.
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