The S&P 500 ended lower Wednesday, with investors spooked by Middle East tensions, while a tame inflation report calmed concerns around tariff-driven price pressures and traders awaited more details on China-U.S. trade talks.

Wall Street erased modest gains after sources said the United States is preparing a partial evacuation of its Iraqi embassy due to heightened security risks in the region. A senior Iranian official said earlier that Tehran will strike U.S. bases in the region if nuclear negotiations fail and conflict arises with the United States.

Amazon and Nvidia declined following recent gains, and they weighed on the S&P 500.

Data showed consumer prices increased only marginally in May, while economists expect inflation to accelerate in the coming months due to the Trump administration's import tariffs.

Annually, headline inflation stood at 2.4%, lower than the 2.5% rise estimated by economists polled by Reuters.

"There's still concern about Trump's tariffs being inflationary but this report was better than expected and it fuels hope that the Federal Reserve will be able to step in with rate cuts later on this year," said Robert Pavlik, senior portfolio manager at Dakota Wealth.

Traders project a 70% chance that the Federal Reserve will cut interest rates by its September policy meeting, according to the CME Group's FedWatch tool.

A day after officials from Washington and Beijing agreed on a framework to put their tariff truce back on track, President Donald Trump said the U.S. deal with China was done, with Beijing to supply magnets and rare earth minerals.

According to preliminary data, the S&P 500 lost 15.09 points, or 0.25%, to end at 6,023.72 points, while the Nasdaq Composite lost 93.53 points, or 0.47%, to 19,621.46. The Dow Jones Industrial Average rose 5.35 points, or 0.01%, to 42,872.22.

With investors betting the United States will reach trade agreements that reduce Trump's steep trade barriers, the S&P 500 is now trading just below its February record high.

"The worst-case scenario is probably behind us. There's a little bit of face-saving for both sides," said John Praveen, managing director at Paleo Leon in Princeton, New Jersey. "They got an agreement. The question is whether it will be implemented."

According to a White House official, the agreement with China allows the U.S. to charge a 55% tariff on imported Chinese goods, including a 10% baseline "reciprocal" tariff, a 20% tariff for fentanyl trafficking and a 25% tariff reflecting pre-existing tariffs. China will charge a 10% tariff on U.S. imports, the official said.

The U.S. stock market has rallied in recent weeks, recovering from a slump in April sparked by Trump's "Liberation Day" tariffs.

Software development platform provider GitLab fell after its quarterly results disappointed investors.

Shares of videogame retailer GameStop dropped after it reported a decline in first-quarter revenue.