NEW YORK - Wall Street stocks pulled back from record highs on June 3 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, 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 fervor 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 AI names are trading on their own completely separate world, largely oblivious to macro and geopolitical risk, at least within reason,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “And so there’s going to be a bid for those names, especially on days where everything else looks a little bit less attractive.”

The S&P Software & Services index, battered in recent months by fears of AI disruption, slid 4 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 metastasize into broader, systemic inflation.

“This market continues to demonstrate a tug of war between fundamentals in the US economy, which are incredibly positive, and concerns that the duration of the conflict in the Middle East will lead to downside risks,” said Bill Northey, ...