June 3 (Reuters) - Wall Street's main indexes retreated on Wednesday after a run of record highs, while a fresh Middle East flare-up pushed oil prices higher and cast doubts over a quick end to the war.
Brent crude futures rose over 2% after an Iranian missile attack damaged Kuwait's airport and the U.S. military carried out strikes near the Strait of Hormuz, raising the risk of further supply disruption that could stoke broader inflation.
Stocks and sectors that led gains in recent days logged the steepest declines. Software stocks (.SPLRCIS), shed 4% following a sharp rebound, while Datadog (DDOG.O), Palo Alto (PANW.O), and IBM (IBM.N), fell between 4.6% and 8.5%.
Four of the 11 S&P 500 sectors were in the red, with the financial index (.SPSY), leading declines.
Asset managers dropped after Switzerland's Partners Group (PGHN.S), capped withdrawals from an $8.6 billion private equity fund. KKR (KKR.N), Blackstone (BX.N), Blue Owl (OWL.N), and Ares Management (ARES.N), fell between 3.8% and 4.9%.
"(Markets) had done so well for so long that we were at a point of market being overbought technically. It could take just about anything to take some of the steam off the top of the market at this point, just because it's come so far, so fast, in such a short period of time," said Eric Parnell, chief market strategist at Great Valley Advisor Group.
Latest data showed that the U.S. services sector activity picked up in May as businesses preemptively placed orders and rebuilt inventories in anticipation of shortages and higher prices because of the war with Iran.
Investors are now awaiting the labor market report, which could shape expectations for monetary policy. It's expected on Friday.
Money markets expect the Federal Reserve to keep interest rates on hold for the remainder of the year, with growing odds of a 25 bps rate hike.
At 11:39 a.m. ET, the Dow Jones Industrial Average (.DJI), fell 441.72 points, or 0.86%, to 50,866.07, the S&P 500 (.SPX), lost 40.12 points, or 0.53%, to 7,569.52 and the Nasdaq Composite (.IXIC), lost 205.32 points, or 0.76%, to 26,888.58.
The small-cap Russell 2000 (.RUT), dropped 1.2%.
New York Fed President John Williams said monetary policy was "in the right place", despite inflation worries amid the Iran war. Fed Chair Kevin Warsh pledged to follow "the best of the Fed's traditions" in a note to staff at the start of his four-year term.
The S&P 500 closed above 7,600 for the first time on Tuesday, as all three major indexes ended at records, driven by a run of corporate updates reinforcing expectations of sustained AI spending.
The Philadelphia chip index (.SOX), rose 1.1%. Broadcom shares (AVGO.O), added 1.2% ahead of the company's quarterly report due after market close. The results would be the next key test of AI-driven momentum. The stock has already risen 14% in the past four sessions.
Marvell Technology (MRVL.O), extended gains with a 5.4% rise, hitting $250 billion in market value, a day after Nvidia CEO Jensen Huang called the chipmaker the next "trillion-dollar company."
In other moves, GameStop (GME.N), advanced 6.7% after posting a rise in quarterly revenue and unveiling a $2 billion share buyback program.
Meanwhile, Elon Musk's SpaceX plans to price its IPO at $135 a share, ahead of a roadshow, to raise a record $75 billion, a source familiar with the matter told Reuters on Tuesday.
Declining issues outnumbered advancers by a 2.31-to-1 ratio on the NYSE, and by a 2.45-to-1 ratio on the Nasdaq.
The S&P 500 posted 31 new 52-week highs and 18 new lows, while the Nasdaq Composite recorded 76 new highs and 112 new lows.
Reporting by Medha Singh and Twesha Dikshit in Bengaluru; Editing by Mrigank Dhaniwala and Shinjini Ganguli
